The Economic Megathreats That the World Has No Answers To | Economics Explained with Dr. Roubini

Summary

The video explores the multifaceted role of economists as advisors in global contexts, emphasizing their importance in forecasting and advising on economic scenarios despite the inherent unpredictability of economies. It delves into the challenges posed by globalization's reversal, escalating debt crises, and the threats of artificial intelligence and climate change to economic prosperity. Highlighting the significance of international cooperation and adaptive strategies, the video seeks to shed light on the potential mega threats identified by economists and the urgent need for viable solutions to safeguard the future economic landscape. The global economy's resilience and growth potential, despite these challenges, are also underscored, offering a balanced perspective on the complex dynamics at play.

Takeaways

• 👨‍💻 Economists primarily serve as advisors to decision-makers in global companies, organizations, and governments, using their understanding of social sciences to project outcomes of significant decisions at various levels.
• 🔮 Good economists, like good lawyers, don't predict the future but outline likely scenarios and how to navigate them, focusing especially on potential risks and mitigation strategies.
• 🛠 A major role of economists involves discussing worst-case scenarios, which often leads to their reputation as eternal pessimists; however, this cautionary approach is crucial for preparing for potential economic challenges.
• 🌍 Key global economic threats identified include the end of globalization, the return to national self-sufficiency, stagflationary crises, the mounting global debt crisis, challenges posed by AI, and climate change.
• 🛫 Globalization has been a significant wealth creator by facilitating the exchange of goods, services, technology, and labor among countries, but recent trends show a shift towards de-globalization, risking economic prosperity.
• 💸 The 'mother of all debt crises' looms as global public and private sector debt levels soar, challenging economies, especially emerging markets, as interest rates rise.
• 🌎 Climate change poses a complex economic threat, requiring significant investment in alternative energy or carbon capture technologies, with poorer countries facing the most severe consequences.
• 🧮 The rise of technologies like AI could potentially render human labor redundant in various industries, posing an existential risk to the labor market.
• 📝 Economists advocate for proactive measures against these mega threats despite the costs, emphasizing long-term benefits over short-term sacrifices.
• 🗺 The global economy's resilience and growth underscore the importance of addressing these challenges to maintain and enhance economic prosperity worldwide.

Q & A

What roles do economists play in global decision-making?

Economists spend most of their time as advisors to decision makers in global companies, organizations, and governments, using their understanding of social science to make projections about how big decisions could play out at various levels.

Why is it important for decision makers to consider worst-case scenarios according to economists?

Economists focus on worst-case scenarios to prepare decision makers for potential negative outcomes of their plans, earning them a reputation for being pessimistic. However, this approach is crucial for identifying risks and developing strategies to mitigate them.

How has globalization contributed to global economic growth?

Globalization, through the sharing of goods, services, labor, technology, and information among countries, has made all participating countries wealthier by leveraging comparative advantages and fostering the transfer of innovations and efficient production techniques.

What are the predicted consequences of a reversal in globalization trends?

A shift away from globalization could lead to higher costs for consumers, reduced collaboration between countries, less sharing of resources and technology, and potentially lower economic growth rates as countries move towards more self-sufficient, national economies.

What are some of the major economic threats identified by economists for the next century?

The major economic threats include the end of globalization, a stagflationary crisis due to the end of easy money, a significant debt crisis, challenges posed by artificial intelligence to worker and consumer-based economies, and climate change.

Why is global debt considered a potentially critical issue?

Global public and private sector debt has significantly increased over the decades, posing a risk especially as interest rates rise. While high debt levels can be sustainable with low interest rates, rising rates can lead to servicing challenges and potential crises.

What impact could climate change have on global economies, particularly poorer countries?

Climate change poses a significant threat by potentially increasing natural disasters and requiring large investments into alternative energy sources, carbon capture technologies, or emission reductions, which could disproportionately impact poorer countries.

What are 'zombie companies' and how do they relate to the current economic climate?

Zombie companies are firms that produce no real economic value and are only kept alive because of artificially favorable market conditions, such as low interest rates. These companies may face significant challenges as borrowing costs rise.

How does the concept of comparative advantage relate to globalization?

Comparative advantage refers to the principle that countries benefit from specializing in and trading goods and services that they can produce more efficiently than others. This concept underpins the economic benefits of globalization.

What solutions are proposed by economists to address the major threats to economic prosperity?

Economists propose understanding the costs and sacrifices of solutions, investing in infrastructure and technologies, international cooperation to enforce emission reductions, and preparing for the impacts of artificial intelligence on labor markets.

Outlines

00:00

🧐 The Role of Economists and the Unpredictable Future

Economists primarily serve as advisors to key decision-makers across global entities, leveraging their insights into social sciences to project outcomes of significant decisions at various levels. While precise future predictions are beyond their scope, economists are crucial for outlining possible scenarios and preparing strategies to navigate them. The segment highlights the inherent uncertainty in economic forecasting but underscores the value in examining worst-case scenarios and potential mega threats to global economic prosperity. These include the decline of globalization, stagflationary crises, escalating debt levels, the challenges posed by artificial intelligence, and climate change. The narrative emphasizes the importance of understanding potential economic downturns and the strategic responses required to mitigate these risks.

05:00

🌍 Impact of Diminishing Globalization and the Global Pandemic

This section discusses the negative impacts of declining globalization, exemplified by Brexit and its resultant economic downturn in the UK, contrasting with the relatively stable economies of Continental Europe. It touches on the global pandemic and geopolitical tensions exacerbating cautiousness in trade relations and supply chain management, leading to a shift from 'just-in-time' to 'just-in-case' strategies. This shift, while increasing geopolitical security, incurs higher production costs and reduces the efficiency of global trade, potentially impoverishing economies on average. The dialogue with Dr. Nouriel Roubini underscores these challenges, highlighting the broader economic repercussions of a move towards nationalism and away from global economic integration.

10:02

📉 The Looming Debt Crisis and Economic Vulnerabilities

Focusing on the burgeoning global debt crisis, this paragraph outlines the unsustainable increase in debt levels among governments, businesses, and households. It discusses the unique challenges faced by countries that borrow in foreign currencies and the impending difficulties as interest rates rise. This situation is particularly perilous for emerging markets, which are at risk of experiencing severe economic downturns. The narrative also explores the concept of 'zombie' companies and countries, sustained through artificially favorable market conditions, and the potential fallout as those conditions change. The discussion includes insights from Dr. Roubini on the sustainability of debt levels and the transition from a period of low interest rates to a reality where debt servicing becomes increasingly burdensome.

15:02

🔥 Climate Change and Economic Inequality

This segment addresses the significant threat of climate change, especially its disproportionate impact on poorer countries. It explores the dilemmas facing emerging economies, which must balance the need for economic growth with the imperative to reduce emissions. The text delves into the challenges of implementing global solutions to climate change, including the 'free rider' problem, where countries might eschew cooperation to gain economic advantages. Dr. Roubini's book offers insights into potential solutions, emphasizing that addressing climate change requires short-term sacrifices for long-term benefits, though political and economic realities often hinder these necessary actions.

20:03

🌐 Global Economy Overview and Future Outlook

The final paragraph provides a summarized assessment of the global economy's status, leveraging a playful approach with an 'Economics Explained National Leaderboard'. It gives high marks for the global economy's size, diversity, and growth, reflecting on the unprecedented economic expansion over recent decades. Despite the playful tone, the summary underscores the significance of current economic challenges, highlighting the need for serious consideration and action to address them. It concludes by reminding the audience of the enduring value of economic growth and the potential of collaborative efforts to sustain and enhance global prosperity.

Keywords

💡Economist

Economists are experts in economics, a social science that analyzes the production, distribution, and consumption of goods and services. In the video, economists are depicted as advisors to decision-makers in companies, organizations, and governments, using their understanding of economics to project outcomes of major decisions on various scales. The narrative emphasizes that, while economists cannot predict the future with certainty, their analysis of potential scenarios and advice on mitigating risks are invaluable for informed decision-making.

💡Globalization

Globalization refers to the process of interaction and integration among people, companies, and governments worldwide, primarily driven by trade and investment, aided by information technology. The video discusses how globalization has led to economic growth by allowing countries to share resources, technology, and expertise, thus benefiting from comparative advantages. However, it also notes a recent trend of de-globalization, with countries moving towards self-sufficiency and secure trade, potentially making the average individual poorer by reducing the efficiency and benefits derived from global trade.

💡Debt Crisis

A debt crisis occurs when a country or entity is unable to pay back its debt. The video highlights the growing concern of a 'mother of all debt crises,' driven by increasing global debt levels across public and private sectors. It explains how decades of low interest rates encouraged borrowing, but recent rises in interest rates have made these debts more expensive to service, potentially leading to economic instability or collapse, especially in emerging markets that are highly reliant on foreign currency loans.

💡Comparative Advantage

Comparative advantage is an economic principle stating that countries or entities gain and benefit from trading if they produce goods and services at relatively lower opportunity costs than others. The video uses Australia's export of natural resources as an example, illustrating how engaging in trade based on comparative advantages has made the world wealthier, by allowing countries to specialize and trade for mutual benefit.

💡Climate Change

Climate change is identified in the video as a 'mega threat' to economic prosperity, with the potential to drastically reduce the quality of life globally. It emphasizes the need for significant investments in alternative energy, carbon capture technologies, or other innovative solutions to mitigate its effects. The narrative points out the unfair burden on emerging economies, which may lack the resources for such investments or are at a developmental stage where economic growth still heavily relies on fossil fuels.

💡Artificial Intelligence

The video mentions the threat to labor and consumer-based economies posed by artificial intelligence (AI), speculating on technologies that could render human labor redundant. It highlights a shift in the understanding of labor's role in production, suggesting that AI could lead to significant changes in how economies function, potentially displacing jobs but also creating efficiency gains.

💡Supply Chain

A supply chain is a network between a company and its suppliers to produce and distribute a specific product to the final buyer. The video explains the shift from 'just-in-time' to 'just-in-case' supply chain strategies due to recent global disruptions like pandemics and trade tensions. This shift, while increasing geopolitical security, comes at a cost of efficiency and higher prices for consumers, reflecting a trend away from globalization.

💡Stagflation

Stagflation is a situation in which the inflation rate is high, the economic growth rate slows, and unemployment remains steadily high. The video refers to stagflation in the context of discussing the end of easy money and the challenges posed by rising interest rates after a period of historically low rates. It suggests that the transition away from policies of quantitative easing and low interest rates could lead to stagflationary pressures.

💡Zombie Companies

Zombie companies are firms that are unable to cover their debt servicing costs from current profits over an extended period. The video discusses how an abundance of cheap debt enabled the proliferation of such companies, which now face difficulties due to rising interest rates and potentially reduced consumer demand. It highlights the broader economic risks associated with these companies, including inefficiency and the potential for increased financial instability.

💡Economic Prosperity

Economic prosperity refers to the state of flourishing, thriving, good fortune, and successful social status in terms of wealth, health, and happiness. In the video, economic prosperity is used to discuss the benefits of globalization, the threats posed by various global challenges, and the importance of addressing these threats to maintain or improve the quality of life globally. It underscores the role of economic growth in achieving prosperity and the potential setbacks from de-globalization, climate change, and other 'mega threats.'

Highlights

The role of economists in advising decision-makers in global companies, organizations, and governments.

Economists cannot predict the future but can offer valuable advice on handling likely scenarios.

The importance of understanding potential risks and worst-case scenarios in economic planning.

The impact of globalization on economic growth and the sharing of technology and resources.

Concerns over the reversal of globalization and its potential to make everyone poorer.

The shift from just-in-time to just-in-case supply chain strategies due to recent global challenges.

The role of debt in the global economy and how it has evolved over time.

The potential crisis emerging from high levels of public and private sector debt.

The differing impacts of economic policies and debt levels on various countries.

The threat of climate change to global economic stability and growth.

The challenge of balancing economic growth with environmental sustainability.

The economic implications of artificial intelligence and automation.

The importance of preparing for and mitigating so-called Mega threats to maintain economic prosperity.

The global economy's size, growth, stability, and industrial diversity.

A call for global cooperation to address the challenges posed by globalization, debt crises, climate change, and technological advancement.

Transcripts

the role of an economist is something

that most people even career economists

themselves don't always fully understand

people that actually become career

economists spend most of their time as

advisors to decision makers in global

companies organizations and governments

economists are relied on to use their

understanding of the social science to

make projections about how big decisions

could play out in an individual National

or occasionally even a global level now

you probably already know what I'm about

to say nobody can predict the future

least of all economies but that doesn't

mean that their advice on these

decisions is not worth listening to and

we'll see a perfect example of that

later in this very video good economists

are kind of like good lawyers they can't

tell you exactly what's going to happen

in the future and any that claim that

they do know exactly what is going to

happen are either really dumb or really

dodgy now while they can't predict the

future what they can do is present some

likely scenarios and then offer advice

on how to deal with those scenarios if

and when they happen but the thing that

most of these big decision makers want

to know more than anything from their

lawyers and economists about their

potential plans is what could possibly

go wrong and how do I fix it if it does

it's for this reason that economists

spend a lot of their time talking about

worst case scenarios and they get a

reputation for being Eternal pessimists

but that's what they're meant to do you

wouldn't get a divorce lawyer to write

your wedding vows just like you wouldn't

get an economist to tell you about how

great the future could be so in the

spirit of being good economists it's

worth exploring some of the so-called

Mega threats that could genuinely reduce

quality of life for almost everyone even

if they don't end up coming true it's

better to know what is worrying some of

the greatest economists of our time and

what they are proposing as solutions to

the problems that we could be facing in

a not too distant future so instead of

answering a series of questions in this

video we're going to look at what most

economists have highlighted as the

biggest threats to our economic

prosperity in The Next Century and those

are the end of globalization and the

shift towards more self-sufficient

National economies the end of easy money

causing a stagflationary crisis the

mother of all debt crises that's been

slowly growing in the background of the

global economy the threat to worker and

consumer-based economies posed by

artificial intelligence and of course

climate change in our economic response

to fixing ads and I guess we also need

to ask one question which is of course

what are the solutions to these problems

after we've done all of that and just

for a bit of fun we can put the global

economy on the economics explained

National leaderboard

globalization is the process of

countries opening up to one another

building relationships based on the

transfer of goods and services labor

technology Investments and information

by sharing these precious resources

around all of the countries involved in

globalization can become wealthier

overall if for example a country invents

some new technology that allows twice as

much food to be grown on the same piece

of land but they could share that

technology with all the other countries

in the world and suddenly the global

supply of food would double this is

obviously great for all of the other

countries that benefited from receiving

that technology that they wouldn't have

otherwise in a totally closed off global

economy but it can also benefit the

country that invented the technology as

well if that country sells that

technology they could make much more

money than they would have by just

farming and selling their excess food

supply separately they can use this

money to import other stuff so that

everybody ends up with more resources

overall one of the biggest reasons why

countries like Japan China Taiwan and

South Korea were able to grow so rapidly

over the past five decades as compared

to countries like the UK and the USA

which took centuries to fully

industrialize is because they did not

need to create everything from scratch

China didn't need to invent modern

electrical grids and production lines

you could just import the technology

from countries that already had the

expertise in making these tools so they

get straight to business making cheap

consumer goods to kick-start their

economy even outside of sharing

technology certain countries just do

certain things better than others my

home of Australia has some of the

largest deposits of natural resources in

the world but we have a tiny population

that demand very high salaries so

refining those resources and turning

them into end products is possible but

they would be very expensive and not

very plentiful it's much more

economically advantageous for us to

harvest those resources and sell them

directly to countries that can cheaply

and efficiently turn them into stuff

that then can be sold all over the world

including back to Australia Australia

will make more money and end up with

more resources than if they tried to do

everything themselves this is the basic

concept of comparative advantage it's a

big reason why the world has become so

much wealthier as we've started trading

more but this process is starting to

reverse while making this video we were

lucky enough to speak to Dr nuriel Rubin

who was a senior Economist in the

Council of economic advisors for the

Clinton Administration a senior advisor

to treasury secretary Timothy Geithner a

professor at Yale and a consultant to

the World Bank Federal Reserve and the

international monetary fund during his

time working for these organizations he

was one of the few voices that warned of

the economic threats posed by the

financial processes that led to the 2008

Global financial crisis he has also

published a series of books and academic

papers including Mega threats the 10

trends that imperil our future and how

to survive them which was a big

inspiration for this video he's not

paying us to say this but it is

genuinely a great read if you enjoy

having a nerdy economics existential

crisis before heading to bed anyway if

anybody in the world had a front row

seat to global economic Trends it would

be this man and he signed warning about

this reversal of globalization it thrown

their way from globalization actually I

think it's going to make an average

everybody poorer and their more specific

example I can give is the following one

you know in Europe the UK decides to go

for brexit and do they

inflation in the UK is already double

digits and even the bank of England

expects that the UK is going to have six

quarters of negative economic growth so

there'll be in circulation recession and

inflation so while Continental Europe

and Eurozone are also challenged their

inflation is lower and so far they've

avoided an outside recession while in

the UK there is recession and inflation

if you want to get access to our full

unedited interview with Dr rubini you

can listen to it on Spotify by searching

for economics explained and we'll leave

a link to it in the video description as

well the global pandemic an active war

in Europe and escalating tensions

between the world's two largest

economies and making governments and

corporations much more careful about who

they trade with and where they set up

their supply chains companies have had a

lot of problems in these past three

years getting supplies to complete

products are put on shelves the most

efficient way to supply goods and

services to any Market is the

just-in-time approach this is where

goods and services are produced and

delivered at the very moment they are

demanded a concept that sounds simple

enough in theory is actually incredibly

difficult because a lot of the products

that we take for granted have components

from dozens of countries made from

resources extracted from dozens of other

countries these raw materials and

component parts also have to be

delivered just in time so there's a lot

of things that can go wrong here if

supply chain Engineers can get this

delicate ballet just right though it can

be truly magical just in time means that

resources aren't wasted on storage

things don't expire and when

improvements are made to components

around products they can be changed

instantly instead of having to wait to

sell out or just discarding outdated

Goods the global pandemic in a series of

large economic shocks like the war in

Ukraine brexit and ongoing trade

tensions has made coordinating this

fragile system basically impossible

governments and companies have had to

adopt a just in case strategy where they

order enough goods and services in

advance to run their operations no

matter what happens

going away from a world of fear of free

trade to a world of fair trade or secure

trade going away from a world of

offshoring the world of French shorting

or resorting going away from just in

time Global Supply chains to just in

case in redundance May provide you

greater geopolitical security but it

comes at a cost because you're going to

be producing goods and services not

where its cities are most efficient less

costly but where is more expensive just

in case is much more expensive than just

in time but when the alternative is

empty shelves it's a cost most companies

are willing to pay and by pay I mean

obviously pass along to their consumers

now you might just think this sounds

like an inconvenience for businesses

that are going to have to rent out more

warehouse space but those costs are

going to be passed along to Consumers as

higher prices and this shift in strategy

is also going to mean less collaboration

between countries which means less

sharing of resources technology and

everything else that is made by World a

richer place in recent decades there are

some people that are celebrating the

idea of less globalization because it

means less jobs being sent overseas and

more stuff being done in their own

country in our upcoming video on

Zimbabwe we will explore how the country

is trying to make sure all the

lithium-bit mines is refined in the

country before it's exported overseas so

that more evaluating takes place in its

economy and hopefully more jobs are

created the example from earlier with

Australia exporting its raw materials is

also a hotly debated issue and many

people don't like the idea that we're

selling iron ore to Japan just so it can

turn it into cars and sell it back to us

at a one thousand percent markup this

animosity towards globalization is

understandable but it is still something

that has on average made us all a lot

wealthier a shift away from the

globalization is going to have a

meaningful impact on potential growth is

one of those as declarationary shocks

that can reduce potential growth and

increase the cost of production

it's true that the globalization has had

you know winners and losers the economic

ties become bigger but some workers some

firms have been better off some of them

have been worse off but a trend away

from globalization actually I think it's

going to make on average everybody

poorer this breakdown of global Commerce

is also coming to us when we can least

afford it all while we're staring down

the barrel of the mother of all debt

crises

Global public and private sector debt

has grown from around 100 of global GDP

in 1970 to 200 in 2000 to 250 today now

growing debt levels are something that

are often thrown around by people trying

to claim that our entire economic system

is on the verge of collapse and normally

these concerns are overblown countries

like the USA can get away with

maintaining relatively high levels of

government debt because they control

their own currency it's also the world's

Reserve currency which means that having

a healthy level of debt allows large

institutions and other governments to

hold their reserves as government bonds

instead of Straight Cash Japan for

example has trillions in US dollar

foreign currency reserves but they don't

keep those reserves as cash in a vault

or even digits in a bank account they

keep those reserves as government bonds

the bonds are much easier to keep at

that sort of scale and they even pay

some interest which is nice it would be

much harder for a country like Japan to

keep US dollars as straight cash if the

US government didn't have debt then

there wouldn't be government bonds which

would make it harder to use those US

dollars as a medium of economic exchange

and I could potentially lead to

International institutions looking for

Alternatives that did have active debt

markets so that was a quick little side

lesson as to why debt can be good but it

can also be very bad for starters and I

know this might shock my American

viewers but there are other countries in

the world apart from the USA and apart

from maybe a dozen other advanced

economies most of them can't borrow

money using their own currency countries

like Pakistan and Sri Lanka have found

themselves in serious economic trouble

because they have taken on massive loans

in American dollars and Chinese RMB and

then temporarily lost their ability to

receive those currencies from abroad

while the USA in places like Japan can

get away with borrowing more than their

GDP a country like Pakistan has run into

problems with government borrowing that

is only 88 of their GDP now we've

already covered this topic extensively

in our two videos on Pakistan and Sri

Lanka so I don't want to repeat too much

here but these two examples are just the

tip of the iceberg and borrowing in

Emerging Markets has grown significantly

in the last two decades taking on lots

of debt to make vital investments into

infrastructure and economic Services was

a strategy adopted by a lot of emerging

economies wanting to emulate the success

of other high growth countries two

decades of low interest rates meant that

there wasn't much risk with these loans

but now these fragile economies have

record debt burdens and interest rates

are on the rise the story of Pakistan

and Sri Lanka are just the first

chapters in what Dr rubini called the

mother of all debt crises

what the level of debt is sustainable

not depends on many factors but the

point I make in the book was that while

that ratios in principle were

unsustainable until two years ago that

servicing ratio of the interest you paid

on your debt was very low because you

had zero policy rates negative policy

rates quantitative easing and credit

easing keeping even long-term profit and

public rates low if not negative you

know two years ago it was 18 trillion

dollar equivalent of public debts within

Europe and Japan that they yield it was

negative in nominal terms and maturity

up to 10 years in Scandinavia like

Denmark mortgages long-term mortgages

had a negative yield because you know

you have negative policy rates and the

spread of mortgages over that implied

negative interest rates on your

mortgages so of course that ratio were

unsustainable but that surfacing ratio

were so low that it looked like that

were sustainable

and we actually reacted to the GFC and

the covet crisis with more monetary

Fiscal Credit using zero eighth negative

even more aggressive quantitative and

credit easing but now the party is over

and it's over because all this easing

LED not only to asset inflation but now

finally

because of negative Supply shock and

excessive aggregate demand has led to

goods and service inflation and central

banks now have to increase interest

rates to fight inflation governments are

not the only ones that have been taking

on lots of debt businesses and

households are also holding on to record

amounts business debt has often been

considered by economists as a good type

of debt because businesses normally only

take out loans if they think that they

can use the money to make returns that

are higher than the principal plus

interest rate payments the problem with

this conventional assumption is that a

lot of businesses also got used to cheap

debt so it became more and more

commercially advantageous to take on big

loans to fund expansion or sometimes

even just to buy their own shares back

from the market which made their

investors very happy not many of these

companies expected the cost of borrowing

to Triple in two years and now they're

in a position where consumer demand may

be waning at the same time that they

need to make much larger repayments on

their loans rubini spoke about the rise

of zombie companies and even zombie

countries which provide no real economic

value to the global system but have been

kept alive simply because market

conditions have been artificially kept

so favorable we cannot generalize even

within Emerging Markets or Frontier

economies there are countries with

better macro and structural policies

their country that are much more fragile

you know the IMF and the World Bank have

identified about 80 countries mostly

poor developing countries some of them

Emerging Markets like the one you

mentioned uh that are Lebanon Pakistan

Zambia Sri Lanka that are having attack

prices

um but there are about 80 countries 11

debt servicing problems and we'll have

to restructure orderly or otherwise

there's betterations so there will be

attack prices in many countries these 10

global companies and emerging economies

are exactly the same group that is going

to be hardest hit by a move away from

globalization as well most countries

start their Economic Development by

providing low-cost manufacturing or

services to larger and more advanced

economies if the trend is to bring

manufacturing and services back onshore

they're going to miss out on that source

of income at the same time that their

record debts start to become very

expensive if that wasn't bad enough then

there are still the economic unknowns

climate change is a major economic

threat that is going to affect us all

but once again it's likely to be the

poorest countries that bear the brunt of

the burden no matter how it plays out to

reduce the effects of climate change we

need to reduce emissions to reduce

emissions we either need to make large

investments into alternative energy

sources and storage infrastructure

reduce output or make even bigger

investments into carbon capture

Technologies or some really wild ideas

like space Shades to block a small

portion of sunlight hitting the Earth

poor countries can't afford to make

large investments into new technologies

and for now economic growth still does

depend heavily on burning fossil fuels

to power industry it's also not fair to

tell emerging economies that we're

giving up economic growth to control

emissions people in advanced economies

could live just fine if economic growth

stagnated but billions of people in the

world right now are on the cusp of

getting access to a lot of luxuries that

we in the west take for granted

consistent electricity clean running

water efficient Transportation access to

the internet machines to make domestic

duties less labor-intensive Advanced

Medical Care and good quality housing

it's stuff that people in advanced

economies don't even think about but we

only got to that point by growing our

economies mostly by burning fossil fuels

even if for some reason these economies

did got on board with the idea of

slowing economic growth for the greater

good there is still a problem of how to

enforce it if all other economies slowed

down their Industries or make big

expensive investments into Renewables

that would be great but a few

opportunistic countries might just take

advantage to grow their Industries with

cheap fossil fuels and out-compete their

Rivals by providing cheaper goods and

services to the global economy and their

own domestic markets economists call

this the freerider problem and it's one

of the biggest reasons that progress on

a lot of these issues has been so slow

in the book for each one of the 10 mega

threads I discussed the Solutions in

detail but I make the point that the

economy recognized there is never a free

lunch the solution of any kind of issue

implies costs and sacrifices in the

short run for the common good and the

benefits of a society aren't we on the

wall over the medium long term and many

times it's hard to make those sacrifices

in the short run because they're

individually costly because we discount

the future we hope that maybe some

miracle of technological resolve the

problems and politicians there will need

to be related and even in authoritarian

country they need that legitimacy uh you

know the time to keep the can on the

road because the political economy

reform is that the costs are in the

short run the benefits are medium long

term and you might not be empowered if

you do pay for reform you know then I'll

disgrace the former chancellor of

Germany Schroeder when he was in

parading the reform including of the

labor market that let German to become

Uber competitive but guess what the next

election is kicked out of power and the

last and foremost

politician is Don't Rock the Boat don't

do pain for reform because they're gonna

lose power nobody wants to be the world

leader that made their people sacrifice

their economic prosperity for the good

of other countries that are doing

nothing to help themselves the other

alternative is to do nothing but the

scientific consensus is that this will

result in an increase in natural

disasters which we are already starting

to see these again hurt developing

economies more than established

economies they don't have the tools and

resources to defend themselves from

these events and pay for the damage once

it's been done one of the reasons that

the economy of Pakistan is on the verge

of total economic collapse is because of

a flood that killed 1700 people and did

30 billion dollars worth of economic

damage in an economy with a total

economic output of only 348 billion

finally there is the rise of

technologies that could replace labor

typically economists believe that labor

was the only thing that could produce

output the other factors of production

capital and land only made it possible

for labor to produce more output but

without labor nothing got done Capital

advancements like machinery and even

robots didn't replace labor so much as

they made possible for the same amount

of Labor to produce more stuff but some

are now speculating that new

technologies can so comprehensively

emulate the function of human labor that

we could make actual people totally

redundant nobody can predict the future

least of all economies and all of these

predictions are exactly that predictions

Dr rabini the person that we consulted

with to make this video has his fair

share of critics that say he's just

overly pessimistic earning him the

nickname Dr Doom but that's really the

role of a good Economist it's better to

do something about a false alarm than to

do nothing about a building on fire the

solutions will not be fun for anybody

but the Alternatives will be worse and

hoping for new technology to save the

day is a risky bet to make when the

stakes are this high

okay just for fun after a not so fun

video it's time to put the global

economy on the economics explained

National leaderboard starting with size

the global economy has a GDP of 96

trillion dollars and it's probably going

to reach a hundred trillion dollars this

year now my zero to ten scale wasn't

really made for this so let's give it a

10 out of 10 but only because it can't

go any higher GDP per capita is uh well

unsurprisingly right in line with the

global average of 12 234 this is more

than double what it was just two decades

ago and goes to show just how valuable

economic growth can be to people less

fortunate than ourselves a doubling of

output means that the average person now

has twice as much General economic

Prosperity as they did a generation ago

but since the global average is exactly

in line with a global average it gets a

5 out of 10. stability and confidence is

high because of the general diversity of

including every single economy in the

world in the same way that a portfolio

of stocks and bonds will be more stable

than any one stock picked individually

it gets a 9 out of 10 only because it's

still susceptible to Global trends that

some select economies can ride out

growth has been shockingly good the rise

of China has boosted the average but the

last two decades have been the most

intense period of economic growth ever

in history and with all the Doom and

Gloom in the world it's probably worth

reminding ourselves that we are living

in a golden age of economic prosperity

in the year 2000 global economic output

was 34 trillion dollars today it's

triple that and almost a hundred times

what it was in 1960. in the last 10

years despite everything that went on

the world the economy still grew by 50

percent it gets a 7 out of 10. finally

industry this is an interesting one

modern industry has been the driving

force of that growth but some of our

most important resources still rely on

low-cost labor from people using basic

hand tools even still global Supply

chains and modern technology it would

have allowed countries to participate in

this overwhelming growth Trend obviously

some have benefited more than others but

the global economy gets a 7 out of 10.

altogether that gives the Earth an

average score of 7.6 out of 10 which

puts it way up here again this scale is

definitely not made for ranking the

entire global economy but hey nobody's

using this list throwing things serious

so I hope you all forgive me for having

a little bit of fun with it thanks for

watching mate bye