The World Bank has forecast a significant slowdown in global growth from 2021 to 2024, which is projected to be twice as severe as the period between 1976 and 1979. The road to recovery from stagflation will be challenging, marked by steep interest rate hikes and economic downturns in high-income countries, alongside sovereign debt crises in low- and middle-income countries (LMICs). Vulnerable populations will bear the brunt of these struggles, highlighting deep-rooted inequalities within the global financial system. Ghosal and Thomas (2023) argue that this often results in debt restructuring that comes too late and is insufficient.

Ongoing crises, such as conflicts in the Middle East and Ukraine, show little sign of reversing the forces driving energy and food prices higher. Inflation and elevated interest rates, by recent standards, are likely to persist without a clear resolution in sight. At the same time, deeper secular trends continue to place downward pressure on productivity growth. Recent technological waves have not matched the productivity impact of earlier innovations.

In the UK and other high-income nations, rising inequality has fuelled public backlash against globalisation and immigration. This has coincided with a drift from democracy towards "anocracy" and a limited enthusiasm for global cooperation, giving way to nationalism and regionalism. Such shifts threaten coordinated climate action, as noted in the AR6 reports by the IPCC, disproportionately affecting LMICs. The World Bank warns that by 2030, 40% of children, primarily in LMICs, may experience "learning poverty."

Studies provide valuable lessons for today’s challenges. Broadberry and Wallis (2017) found that long-term economic gains are primarily achieved by reducing the frequency and severity of economic contractions. Tainter (1988), in "The Collapse of Complex Societies," demonstrated that as societies grow more complex, their marginal benefits diminish while costs rise. Historian Scheidel highlighted that mass violence, often through wars and pandemics, has historically been the primary equaliser of wealth, with policy-driven redistribution playing a minor role. These studies emphasize that structural and technological changes, combined with intra-elite conflict and political instability, often leave the most vulnerable bearing the greatest costs.

In the UK, both major political parties remain committed to globalisation, technological change, and deregulation, presenting versions of "managerial capitalism" where taxes support public services and welfare. Populist movements, however, have found traction among middle- and low-income voters, particularly skilled and semi-skilled workers, small business owners, and pensioners. Stagnant incomes, the replacement of stable manufacturing jobs with lower-paying service roles, and restricted welfare access post-financial crisis have driven their discontent. This has fostered opposition to immigration, "political correctness," and powerful corporations, with calls for the nation state to shield them from global and technological shifts.

The time calls for a modern "Economic Bill of Rights," echoing Franklin D. Roosevelt’s 1944 vision. Core rights such as decent jobs, sufficient earnings, adequate medical care, and protection against economic insecurity remain as vital today as ever. While originally intended for the US, these principles resonate universally and should ideally integrate sustainability considerations. The reality that, despite decades of growth and innovation, these rights are not fully realised speaks to enduring policy failures.

There is a brief opportunity for comprehensive institutional reform that prioritises human dignity and freedom. However, entrenched interests and outdated mindsets will resist change. The demand for reform is strong, and the potential for transformation is real. Without restructuring the foundational systems underpinning the economy, the UK—and indeed the world—risks missing the chance to build a sustainable, fair, and stable economic future.

Read the full blog on the Academy of Social Sciences website.

First published: 11 November 2024

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