DUBAI: The world will likely enter a recession by next year as the backlash against globalization continues to grow, economist Paul Krugman predicted on Monday.
Speaking at the World Government Summit in Dubai, Krugman warned that world was witnessing a landscape of stagnant wages, growing inequalities, and a loss of confidence in the world’s business leaders which in turn led to a populist backlash against globalization.
“The result is clear: forward motion on globalization has stopped, but it was slowing anyway,” Krugman said.
And he said there is “quite a good chance that we will have a recession late this year or next year.”
He said there was a general lack of preparedness among economic policymakers.
“The main concern has always been that we don’t have an effective response if things slow down…we don’t seem to have a safety net.”
Krugman said central banks lacked the tools required to protect against market turmoil, and planning for risk has been minimal.
Instead, trade wars and growing protectionism continue to dominate policy agendas, deferring attention and resources from what should be the real priorities.
“I don’t see the iceberg out there, but if we do hit one, I know for sure this liner is not unsinkable,” Krugman said, comparing the global economy to the Titanic.
He said people felt short changed by the previous generation of economic growth, but he said those discussing a solution seemed not to be touching on the issue.
“The question is what they want as the solution…turns out that’s not as clear,” Krugman said, highlighting what he called the gap leaders needed to fill in order to avert another “Great Depression.”
On what many are calling the Fourth Industrial Revolution, Krugman warned that, contrary to popular belief “technological change is actually relatively sluggish right now.”
And he said he doubted the claims that technology was so advanced it would soon change the way we work and live, adding “this is not a transformative revolutionary era.”
Krugman concluded that despite the technological advancements of the last 25 years, the way we work “had not changed all that much.”