The Myth of the Unprecedented

By Stephen S. Roach – Project Syndicate

Confession: my crystal ball has been cracked so many times by purportedly unprecedented developments that I have lost count. The 1970s was a decade of extraordinary turmoil: the oil shock of 1973 was swiftly followed by the “Great Inflation” and a period of stagflation, setting the stage for the first seemingly unprecedented phase of the post-World War II era. The subsequent disinflation of the 1980s allowed the horror movie of the 1970s to run in reverse well into the 1990s, which came to an end with the Asian financial crisis, ushering in what was initially billed as the first crisis of globalization.

But today, we look back on these episodes as mere tremors preceding the seismic shocks to come. The information-technology revolution and the dot-com bubble of the late 1990s and early 2000s hinted at the profusion of asset bubbles that afflicted global property markets and many financial instruments, from sub-prime mortgages to broader credit flows and equities. When the music stopped, the resulting cross-border and cross-instrument contagion fueled the global financial crisis of 2008-09 – another extraordinary upheaval for what had become, at that point, a crisis-battered world.

Just when everyone thought global conditions couldn’t get much worse, a once-in-a-century pandemic and extreme weather events fueled by climate change turned conventional thinking on its head, as did the rising tide of protectionism, trade and tech wars, and a potential superpower collision between the United States and China. Add to that the outbreak of war in Eastern Europe and the Middle East, and the unprecedented has become the new norm. Books on the “permacrisis” and the “polycrisis” now make the bestseller list.

The cynic in me says, “Been there, done that.” But just because I have plied my trade as a forecaster during a half-century of turmoil doesn’t mean I have a unique understanding of what comes next. Bearing in mind Mark Twain’s observation that history often rhymes, I offer three key lessons from my experience in attempting to make sense of what may lurk in the uncertain future: