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A World of Unwelcome Replays

From high inflation to a ground war in Europe to widespread technological disruptions, the biggest challenges facing the world today are hardly unprecedented. Yet they seem to have caught policymakers largely by surprise.

STANFORD – Watch any sport nowadays, and you will be treated to instant replays that give you a detailed – often slow-motion – view of important moments. Watch the news, and you may find yourself feeling like you are similarly watching the past on playback. But these replays – of high inflation, soaring public debt, a brutal ground war in Europe, a new cold war, and the rise of potentially destructive technologies – are far from instant, and the stakes are much higher.

Readers might recall that I predicted rising inflation and slower growth as early as spring 2021. Former US Treasury Secretary Larry Summers did so even earlier. Yet today’s inflation – the worst since the early 1980s – caught most people by surprise.

Supply-chain snarls, including energy-market and food-system disruptions linked to Russia’s war on Ukraine, contributed to the initial surge in prices. But the main driver of today’s inflation has been profligate monetary and fiscal policies, which were upheld despite quicker-than-expected recoveries from pandemic lockdowns.