What Next for the Post Covid Global Economy: Could Negative Supply Shocks Disrupt Other Fragile Systems?

Abstract

There is a reasonable likelihood that that the next global economic crisis could threaten the future of democracy. The economic system is a complex, adaptive system (CAS) subject to “tipping points” when underlying stresses lead to crisis. Moreover, the economic system is nested within a number of other CAS; political, environmental and public health among others. Looking forward, recurrent negative supply shocks imply a dangerous future of higher real interest rates and debt distress leading to either deflation (private debt distress) or higher inflation (sovereign debt distress). Such problems could threaten democratic political systems that are already showing signs of significant stress themselves. The paper finishes with some reflections on policy alternatives.