What accounts for this doom loop?

Early on in the book, Prasad admonishes complacent elites who believe that the current chaos will naturally settle into a new, more stable balance. For him, this is dangerously misguided. Global trends that would normally push toward stability now undermine it, he maintains; there apparently is no self-correcting tendency at work in the world’s economy. Something has malfunctioned badly in the normal tendency of market-led economies to converge on a steady, competitive state.

Challenging the assumption of equilibrium is a good starting point, and no small task for an economist. For the dismal science, equilibrium is not just an assumption but something like a structuring worldview, and Prasad deserves credit for calling it into question. But this is still only describing the problem. To explain globalization’s great reversal, one needs to analyze what caused it. This is where Prasad’s intellectual background (and professional affiliations) becomes a liability.

As an economist, he is committed to free markets as essential to growth and prosperity, by definition. So to diagnose the problem, Prasad points to the ways that states have failed to govern markets effectively. Regulators are asleep at the wheel as corporations amass unchecked monopoly power. Federal agencies that are supposed to look out for the public interest allow new technologies like generative AI to spread out of control, with little sense of what they are or how they work. Wealth concentrates in ever fewer hands, and the lack of a decent safety net leaves the underemployed and unemployed with few opportunities. The highest levels of society have been captured by elites uninterested in the common good, corroding trust in foundational pillars of liberalism like the judiciary and the media. Economic mismanagement, in short, has undermined market democracies.

Prasad saves some of the blame for the failures of international organizations. He criticizes his former home agency, the International Monetary Fund, for holding wealthier countries to different standards than poorer ones—for instance, by imposing harsher funding terms on debt-distressed governments in the Global South. The World Trade Organization could have been more vigilant about enforcing its own rules, as in the case of China, whose alleged abuse of them enabled it to hollow out US manufacturing after China joined the WTO in 2001. This, the story goes, left behind a disgruntled hoi polloi open to irresponsible “populists” like Donald Trump. Such failures have further eroded trust in global governance and made cooperation around existential issues like climate change nearly impossible.

In short, whether the rules were poorly enforced or not up to the task in the first place, the problem is not free markets, efficient as ever, but the corrupt, outdated institutions that have failed them. And so reform is needed to restore market-led growth. As Prasad puts it, governments should “involve” themselves in markets to ensure that they work fairly, but they should not “interfere” with them. If this sounds like a dubious distinction, that’s because it is, but it highlights a critical weakness in his argument. Having criticized the easy assumption that the international order will settle back into a natural balance, Prasad then smuggles in the idea of equilibrium again through the back door, left ajar by his firm faith in the market system. The result is more confusion than insight.

Take a key question of the moment: Is the world settling into a new, post-American multipolar order? As Prasad points out, economists would tend to assume that a more decentralized world will be more stable, as more competition for influence and investment prompts more innovation, encouraging overall growth. But instead we are seeing the exact opposite happen. Prasad prompts the reader to ask, “OK, so why is that?” Yet he has already primed us to expect this supposedly surprising outcome: Prasad notes that a unipolar world has its advantages, such as a central hegemon to back international frameworks for trade and security—all very good for his much-desired stability. Readers could be forgiven for losing him on this point. Does a superpower’s monopoly repress gains from potential competitors? Or does it impose a framework of rules that enables them to compete fairly?

Such obscurity runs through the book, including its practical conclusions. “The world needs true leaders,” Prasad sums up, “who are better able to align their countries’ long-term interests with those of the global community.” We need responsible policymakers and robust institutions to pursue reform across the domains of geopolitics, economics, technology, and the rest. But the task is daunting, because politics has become a refuge “for those intent on perpetuating their own power rather than serving the public good.” Prasad doesn’t specify when or how politicians became so self-serving, so the reader is left guessing.

But there is a more fundamental problem here. Prasad’s concluding call for better leaders and institutions is merely a restatement of his basic premise: It was the lack of these, supposedly, that led to the demise of globalization in the first place. Prasad’s argument, then, does not proceed to or generate anything new but is patently circular. A loop, if you like.

Its emptiness becomes clearer by posing some simple questions: Why might policy elites have initially failed to foresee the disastrous consequences of globalized trade? After all, for decades, politicians, academics, and pundits shared a consensus about the superiority of business over government, about the need to unleash the ingenuity of entrepreneurs and investors to compete in the global arena. Laws and institutions advanced these goals. And for many years, robust growth rates seemed to justify them. Calling for different rules at the time would have been analogous to calling for unfettered free trade and minimal government intervention in our current moment, when economic nationalism has become the unquestioned framework of all policy. Who would have taken it seriously?

This problem applies with equal force to Prasad’s own prognosis of the present. Regarding the changing role of the state, his unsurprising remedy is for a “more nuanced” involvement of government in the economy. “Regulators should avoid picking sides between firms or technologies,” he writes, “leaving that to market forces” in “building a regulatory and institutional framework that allows markets to function well.” At a time when the US government is hell-bent on whatever it takes to win the so-called AI race—even taking direct stakes in a growing number of major companies—who is going to listen to this?

And would this advice apply to financial markets? Evidently, modern finance cannot function without constantly expanding state debt and the government’s commitment to rescue, at the public’s expense, any major firm that is in danger of collapsing—what some commentators have called the “bailout state.” Given the fiscal extremes of the bailout state—currently running a tab of some $6.6 trillion and set to expand, along with a 129 percent public-debt-to-GDP ratio—is this the kind of nuanced regulation that Prasad has in mind? If not, what can really be done about it?

Doom Loop’s argument can be reduced to the platitude that policymakers made mistakes, and now it’s up to these same policymakers to fix the problem they created. The book is meant to track the collapse of the US-led international order, but it is better read as a demonstration of the collapse of liberalism as a way of knowing and acting in the world. This makes Doom Loop interesting, albeit in a different way than the author intended. As a patent product of a bygone establishment, it vividly shows the utter lack of answers on offer from the policy elite. And if they can’t even diagnose the problem, how on earth can they be expected to solve it?

Prasad is a scion of a once-proud clan of mandarins, now shut out from the halls of power. Part of their exile has to do with the misfortune of association with an ancien régime displaced by Trump’s clownish brand of Caesarism. But it also lies in the profound epistemic failure of the policy elite. Economics has always been a “folk science,” to use Jerome Ravetz’s term, an exercise in embellishing common sense with an aura of expertise to reassure a community of believers—in this case, believers in the market system. Now, like its sister discipline political science, it faces an epistemological crisis in which a “research program struggles to deliver an understanding that rises above what ordinary observers can offer.”

The source of the trouble is in the strict separation of economics from politics, an intellectual reflection of a social order in which one class has private control over investment, over the decisions that determine what gets made and who has to make it. This is the world of capital and class, a conceptual domain in which economics and politics are indeed inseparable, and which remains closed to the servants of the order built upon them. But no real historical understanding is possible without it.

Bourgeois scientists (social and otherwise) thus find themselves in a double bind. They appear either unable or unwilling to analyze the real historical movement through which we arrived at the present, an era that seems to have little use for traditional nostrums about the rule of law, market efficiency, or even just a bare minimum of governmental competency—the basic elements of the economist’s worldview. So the world has little use for them. In the end, Doom Loop shows us why that is the case.