The same forces that boosted prosperity and reduced conflict during the postwar era - shared rules, open markets and international cooperation - are now driving the world toward instability, a new book argues.
"The Doom Loop: Why the World Economic Order is Spiraling into Disorder," by Eswar Prasad, the Nandlal P. Tolani Senior Professor of International Trade Policy in the Dyson School of Applied Economics and Management, in the Cornell SC Johnson College of Business, describes how economics, domestic politics and geopolitics now reinforce one another in harmful ways that are difficult to escape.
"The book represents my attempt to make sense of all the tumult around us and what it could mean for changes in the world order," said Prasad, also a senior fellow at the Brookings Institution, who has spent decades studying globalization, capital flows and monetary systems. "I started out with a somewhat optimistic thesis that we may simply be on a volatile path in transition to a more stable order characterized by greater balance in the distribution of economic and geopolitical power. In working through the arguments, though, I arrived at a darker conclusion than I'd anticipated."
At the heart of the book is a paradox. Globalization, Prasad writes, succeeded in integrating economies and lifting millions out of poverty, particularly in parts of Asia. But its gains were uneven and its risks poorly managed. When capital flowed freely into emerging markets, it often left just as quickly, triggering devastating debt crises in countries including Mexico, Thailand and Indonesia. Governments fell. Public trust eroded. In advanced economies, meanwhile, entire industries hollowed out, fueling resentment that later found expression in populist politics.
Those political reactions, Prasad argues, did not stay confined within national borders.
"False populists hostile to globalization have painted it as a phenomenon that enables one country's gains only at the expense of others rather than promoting common prosperity," Prasad said. "As a result, the system of rules that underpinned the post-World War II global order is at risk of decay or, worse, irrelevance."
Organizations such as the International Monetary Fund and the World Trade Organization, which have long been dominated by advanced economies, struggled to adapt to a world in which economic power is more widely dispersed. As their legitimacy waned, new institutions emerged, many backed by China, but instead of strengthening cooperation, they added to fragmentation.
The result is a world stuck in a negative feedback loop: Economic volatility breeds political backlash; political backlash undermines global rules; the breakdown of those rules intensifies economic volatility.
Prasad devotes particular attention to the rise of what he calls "middle powers" - countries such as India, Brazil and Indonesia that are no longer poor but not yet dominant. Their emergence once promised a more balanced global economy. Instead, they now find themselves squeezed by intensifying rivalry between the United States and China, pressured to take sides in disputes over trade, technology and security. That pressure, Prasad suggests, makes cooperation harder just when it is most needed.
Moreover, noted Prasad, "For all its promise of greater productivity and prosperity, which should encourage international collaboration, the darker side of technology is instead rearing its head and sowing discord."
Innovations like digital currencies and artificial intelligence offer efficiency and growth, but they also amplify inequality and complicate governance. Digital finance can bypass weak institutions, spreading risk faster. Artificial intelligence boosts productivity while concentrating wealth and power. Once again, the forces designed to improve economic outcomes end up destabilizing the system around them.
But this trajectory is not inevitable, Prasad insists. The book criticizes both nostalgia for a vanished global order and fatalism about permanent disorder. Instead, Prasad calls for pragmatic reforms: reshaping international institutions to reflect current realities, designing safety nets that cushion economic shocks, and building rules for new technologies before crises force them into place.
"The Doom Loop" concludes that the doom loop need not become our destiny but escaping it will take Herculean effort. Prasad said: "Despite perceptions that humanity is being swept along by forces beyond its control, leaders, policymakers and ordinary citizens can - and should - play active roles in shaping how these forces are created and play out."
