Professor Tooze on physiology of economic crisis, shocking development in China, and extraordinary irrationality of the US administration

Adam Tooze, Professor at Columbia University and an outstanding researcher and analyst in economic history, took part in Gaidar Forum arranged by the Russian Presidential Academy of National Economy and Public Administration. Professor Tooze gave an interview to Invest Foresight, a main media partner of the Forum.

Commenting on the present-day economic processes, Mr Tooze noted that the main challenge is, “Where in quite advanced societies with high levels of education and good basic infrastructure, their further growth in productivity would come from? That is a common agenda in Russia, Europe and the US. Even in China, there is a substantial reduction in productivity growth rates.”

“It’s not true productivity has always been growing,” he pointed out. “Lengthy periods of improvement were followed by some sudden collapse. The unprecedented productivity growth in Europe since the late 1600-s and in large parts of the world in the second half of the 20th century is historically unique. Yet there is no reason to expect an absolute limit for productivity growth, since the limits of human imagination are the only fundamental limits.”

As far as a major global crisis is concerned, “There is a probability of a slowdown. Yet in China some people expect a real crisis, some shocking kind of development. Still, that is only a probability and by no means a certainty. There already is a dramatic slowdown in Europe, but a general global crisis is now quite unlikely.”

Given the size and significance of the US economy, “The shock of the American turn under the Trump Administration to an aggressive nationalist trade policy is really destabilizing because it disturbs an image that a vast majority of business leaders, economic experts around the world had of our likely future. Instead, now we face a prospect of an escalating trade war. That by itself is not large enough to cause a shock, but it can expand further to more sensitive sectors like carmaking.” Ultimately, that may generate negative outlooks, and “It is expectations about long-run future that drive investment, so there we can see a very significant shift.”

Dramatic changes in technology may bring about political and social challenges. “In the future, where productivity is higher and jobs are scarce, people will have to rely on taxation to redistribute wealth as income will no longer be spread out fairly, so public authorities will have to do the heavy work of redistribution,” Professor Tooze believes. Concurrently, value of natural resources may change. “Over the last 20-25 years a large part of the ups and downs in Russian history was due to hydrocarbons. The assets which oil and gas represent for Russia currently is not just an economic asset, it is a strategic asset.”

Global economy suffers a lot from interstate contradictions, yet “Trade wars are driven by politics. Current trade war is waged for fulfilling a political agenda.” That agenda includes other points as well, erecting a wall along the Mexican border, for example, but “Building a wall in the south of the US is an extraordinary expression of irrationality of the US administration,” Professor Tooze noted.

Previous ArticleNext Article