MegaThreats (2022) delves into the ten most pressing potential threats to humanity’s future. The author examines the evidence and potential consequences for each threat, questioning whether we are doing enough to prevent or prepare for them.
Introduction: Recognize today’s most serious global threats and the dangers that lie ahead.
Life is full of risks. From saying, “I do,” to placing your last 50 bucks all on red – or from changing lanes on the highway to dropping an extra chili into the recipe. Many people are risk-averse, and believe it’s wisest to stay in their comfort zones. But here’s the thing about risks: we get better at dealing with them with each one we take. And with the state of things now, it’s no better time than the present to prepare for bigger and bigger risks.
Today’s biggest threats go beyond traditional geopolitical rivalries. We face inflation, which can decimate savings; debt, which causes economic hardship; trade wars, which result in job losses; and climate change, which has the potential to devastate living conditions. According to author Nouriel Roubini, ignoring these issues will turn them into Megathreats – overlapping, interconnected risks that could destroy civilization. Pretty serious, huh? Well, they don’t call him “Doctor Doom” for nothing.
Roubini is clear: as global citizens, we must be aware of the risks and ramifications of these conditions. So how can we survive them? By taking action now. Time won’t help us face the Megathreats. But despite their dangers, Megathreats provide opportunities. They might force us to innovate, create new ways of doing things, and unite as a global society. But only if we shift our risk perception and recognize what is happening. So, there’s no time to waste– let’s get started. In this summary, we’ll discuss some of the worst Megathreats and why they occur.
The world is in the grip of a debt supercycle.
Are you ready for some more bad news? We are already in the midst of the worst debt crisis in recent history. Global debt exceeds $250 trillion, and central banks are routinely rescuing financially strapped countries. Yes, Global economic growth is starting to wheeze. So how on earth did we get so out of control?
Well, Governments tend to rely on outdated, irresponsible economic options, resulting in unforeseen and obscene debt levels. The United States is far more in debt today than it was, say, during the Great Depression. A recession did not have the same impact on growth back then. Today, it’s a different story. National debt soars annually due to quantitative easing and other monetary policies that rely heavily on the government issuing more debt. It seems policymakers prefer reckless spending to fiscal discipline; governments are addicted to debt while ignoring the long-term consequences.
Likewise, we average folk are pretty much the same. We are also addicted to risk. We take on loans, credit cards, and payment plans and ignore the worst-case scenario. Roubini says wealthy countries with abundant resources have allowed risk to run wild. Regrettably, leaders and policymakers remain resistant to progressive change. And it’s not just the West. Increased risk of debt default in developed countries results in higher borrowing costs and a reduced willingness to lend. As a result, developing economies that were already struggling face an even greater challenge in the years ahead. Each Megathreat seems driven by risk-taking and focusing on the short-term.
In recent years, private debt has raced ahead of public debt, reaching new highs. So now, both public and private debt threaten economic stability. Furthermore, since the economies of so many countries are connected, the problem is getting worse. When there is a financial shock in one region, it can quickly affect other areas. So the likelihood of a global debt crisis shoots up. As governments worldwide try to fix their economies, central banks react by loosening monetary policy to boost growth. But arghh, they’ve made money too cheap for too long. The result? A terrifying boom-and-bust cycle, similar to stagflation in the 1970s. In other words, high inflation and the possibility of a recession are happening at the same time. The difference between now and the 1970s is that governments are stuck in a rut. They keep making the same mistakes over and over again.
Topping this off, global income growth is slowing as countries, corporations, banks, and households owe more than they can repay. All of these issues spell disaster. A more progressive world requires more manageable debt levels.
Expect technological disruptions.
It’s the stuff of science fiction movies: a world where machines are so sophisticated they can do our work for us, freeing us to pursue more leisurely activities. Yet, as artificial intelligence (AI) leaders caution, this future may be closer than we think. Indeed, AI-powered automation is already on the rise, and machines are expected to take over a growing proportion of professions in the coming years.
In fact, AI could eventually render entire professions obsolete, displacing some people while benefiting the richest few. Roubini is sure we are entering a new era of economic and social disruption that has wide-reaching implications for us all. He is not alone in this. Many industries are already aware that AI can perform tasks better than humans.
More and more of our traditional jobs are being replaced by machines that can do them better, faster, and cheaper. So what does this mean for the future of employment? Roubini warns of long-term job displacement and inequality. He says automation will most benefit those who can afford to invest in new systems. As a result, the wealth gap will widen all the more. Sorry, but all signs point to AI-driven pay cuts.
One of the founders of DeepMind, Mustafa Suleyman, says that the jobs that are most likely to vanish are the ones that have narrow, simple tasks. And we are not just talking about robots replacing factory workers. Soon, it’ll be hard to tell the difference between the text, images, and sounds made by AI and those made by humans. As a result, many white-collar jobs demanding high skill levels will become obsolete.
So what should we do? Well, we could start training for occupations that will be more difficult for machines to replace, such as working in child care, plumbing, or electrical work. Alternatively, we could sit back and hope the next generation is generous enough to give us all a universal basic income so we can lounge around and watch Netflix all day. Either way, it’s going to be a bumpy ride.
To avoid the severe impacts of AI displacement, we must begin planning and managing these changes before they become too drastic. Given these alarming forecasts, governments and organizations need to start preparing themselves.
Climate change will cause political, economic, and social turmoil.
t’s not just about the money, folks. Take climate change, for example. As the world heats up, nations are struggling to keep their cool. The global population is increasing, but the water supply is shrinking. Planting seasons are becoming less predictable due to more frequent dry spells and floods. As a result, the land becomes barren, and agriculture becomes untrustworthy. The megathreat of climate change is already upon us. And it’s likely to get worse.
Changes in long-term temperature and weather patterns will cause mass migration. Dealing with the largest influx of refugees puts massive pressure on Europe. Climate change has created the perfect storm of political, economic, and social upheaval. So far, the response has been woefully inadequate, and the situation will only worsen. If we don’t take action to mitigate the effects of climate change, the cost of adaptation will be astronomical. Developing countries get hit the hardest because they lack the resources to deal with climate change independently. We must tax carbon and cease subsidizing fossil fuels, but market-based remedies alone will not address the problem.
Pandemics become more probable as the environment declines. In recent years, there has been a rise in lethal infections such as SARS, avian flu, swine flu, Ebola, and of course, COVID-19. While various causes may contribute to the spread of these diseases, one theory claims that global warming is to blame. According to Harvard’s Center for Climate, Health, and the Global Environment, climate change causes animal habitats to collapse, creating ideal conditions for transmitting diseases from animals to humans.
If left unchecked, climate change will cause irreversible damage to our environment, economy, and way of life. That is why we must take action now. But unfortunately, governments are not investing enough in green and renewable energy to keep us safe. Instead, they are dozing at the wheel and driving us off a cliff.
Aging populations strain government budgets.
You own a company, and it’s experiencing tough times. You need to make some quick decisions to stay on top. One of those choices is to cut the workforce to keep costs down. Sounds sensible, but there is a knock-on effect. For starters, a company can only reduce its workforce so much before it starts to impact productivity and quality of service. Second, it strains the remaining employees, who are expected to do more with less. Lastly, laid-off workers spend less, reducing demand, which can lead to more layoffs.
Does this strike you as a Megathreat? Maybe not for the average business. Nevertheless, many workers in advanced economies are approaching retirement age. Great for those looking forward to some well-deserved rest. Not so much for the economy’s future. It doesn’t take a crystal ball to see that losing the workforce in peaked economies won’t help.
You see, the aging population is putting a strain on government budgets. As more baby boomers retire, fewer young workers replace them. This demographic shift results in an increasing number of adults relying on government benefits. While these programs are essential for supporting retirees, they are rapidly becoming unaffordable. As more workers become eligible for the safety net, the cash required to fund it grows. Even affluent nations face mounting pressure to fulfill long-term health-care and pension obligations. According to a recent Citigroup report, the wealthiest countries have unfunded or underfunded pension liabilities of $78 trillion. The economy will stall as taxes rise and social programs are cut.
So what’s a government to do? Fire up our old friend Quantitative Easing? A tempting solution but one that will lead to more debt. Whatever happens, all plans to cut debts involve breaking promises made to powerful interest groups. This should not deter us from creative thinking.
Economists like Dani Rodrik argue that the effects of an aging population can be mitigated by encouraging immigration. He argues that wealthy nations should embrace free trade instead of populism. Such ideas run counter to the current mood in the West. Despite the difficulties we face, there are solutions. We must, however, be realistic about our challenges and accept that not every solution will be popular. The consequences will be far worse if we don’t act now.
Central banks need reform.
People often think of the economy as a complicated machine. It might be more helpful to think of it as a human body. The central bank is the brain, making sure everything runs properly. The commercial banks, which pump money through the veins, would be the heart. The businesses and customers who fuel growth are the muscles. If one of these parts fails, it will cause problems. Brain damage is potentially fatal.
In recent years central banks have taken on additional roles and responsibilities in response to economic conditions. As we have discussed, they have flooded advanced economies with unprecedented liquidity through quantitative easing. Unfortunately, this policy has had mixed results: while it has helped spur economic growth, it has raised concerns about asset bubbles. Critics believe central banks are abandoning their monetary stability mandate, while supporters argue that they are simply responding to changing conditions.
Foreign and domestic security policies are also a major headache for central banks. Likewise, as the United States continues to pile on debt, there is growing concern that foreign countries will stop accepting the dollar as a store of value. The People’s Bank of China appears ready to replace the dollar with its own currency. To keep the dollar as the world’s reserve, the United States must maintain a level head. If they don’t, the Western economy will likely collapse again, with little to save it.
One thing seems certain: central banks need major reform. Their technological systems are outdated, and their policies create inequality. However, there is a hint of evolution as they consider their most dramatic innovation, a central bank digital currency. But positive change comes with significant risk—decoupling to a digital currency could still cause collapse. Whatever decisions the central banks make, we know the status quo isn’t working.
Climate change, zoonotic diseases, technological disruption, population decline, inequality, and debt—the list of challenges we face is daunting. Can we stop these Megathreats? Roubini says no. However, we sent a man to the moon, eradicated polio, and created the Internet. So, what is preventing us from dealing with these dangers?
Part of the problem is that our current systems aren’t designed to incentivize long-term thinking. Instead, we are overly concerned with the short-term and frequently make decisions based on incomplete, biased information. If we can overcome these obstacles, there may be a way out. We have come a long way in the last 75 years, but if we don’t start working together, we could lose everything. Megathreats require mega solutions.
About the author
Nouriel Roubini is a professor of economics at New York University’s Stern School of Business and the founder and chairman of Roubini Global Economics. He has served in the White House and the U.S. Treasury. He lives in New York City.
Technology and the Future, Economics, Finance, Culture, Society, Futurism, Business, Macroeconomics, International Economics
Table of Contents
Part I Debt, Demographics, and Dangerous Policies
Chapter 1 The Mother of All Debt Crises 11
Chapter 2 Private and Public Failures 30
Chapter 3 The Demographic Time Bomb 47
Chapter 4 The Easy Money Trap and the Boom-Bust Cycle 59
Chapter 5 The Coming Great Stagflation 87
Part II Financial, Trade, Geopolitical, Technological, and Environmental Catastrophes
Chapter 6 Currency Meltdowns and Financial Instability 113
Chapter 7 The End of Globalization? 144
Chapter 8 The AI Threat 16
Chapter 9 The New Cold War 189
Chapter 10 An Uninhabitable Planet? 216
Part III Can This Disaster Be Averted?
Chapter 11 Dark Destiny 241
Chapter 12 A More “Utopian” Future? 261
“Read and pay attention” (Martin Wolf, the Financial Times): the bestselling author of Crisis Economics argues we are heading toward the worst economic catastrophe of our lifetimes, unless we can defend against ten terrifying threats.
Renowned economist Nouriel Roubini was nicknamed “Dr. Doom,” until his prediction of the 2008 housing crisis and Great Recession came true—when it was too late. Now he is back with a much scarier prediction, one that we ignore at our peril. There are no fewer than ten overlapping, interconnected threats that are so serious, he calls them Megathreats. From the worst debt crisis the world has ever seen, to governments pumping out too much money, to borders that are blocked to workers and to many shipments of goods, to the rise of a new superpower competition between China and the U.S., to climate change that strikes directly at our most populated cities, we are facing not one, not two, but ten causes of disaster. There is a slight chance we can avoid them, if we come to our senses—but we must act now.
In the 1970s, the U.S. faced stagflation: high rates of inflation combined with stagnant employment and growth. Today, we are heading toward a Great Stagflation that will make the 1970s look like a walk in the park.
“Roubini cuts to the real problems like a hot knife through butter, with a clarity of mind that is rare among economists. I have never seen a more lucid and nuanced account of our financial condition. Not only will the reader be better off after reading this book, but the world will be a better place when central bankers absorb its message.” ―Nassim Nicholas Taleb, author of The Black Swan and Skin in the Game
“No economist is better able to curdle the reader’s blood than Nouriel Roubini. What makes his views significant however is not that they are scary, but that they generally prove to be true. With this book, alas, he has surpassed even his high standards: the ten megathreats he details are as scary as they are plausible. Forewarned is forearmed. Read and pay attention.”―Martin Wolf, Chief Economics Commentator, the Financial Times
“From the economics guru who predicted the 2008 crash, MegaThreats breaks down the most dangerous risks threatening global peace and prosperity in the coming decades. Nouriel offers a sobering analysis of the challenges we’ll face to avert the worst, as each crisis reinforces the others and hinders our ability to respond to all of them. The choice is clear: either we overcome deep-rooted political and geopolitical barriers to mount an adequate collective response (my preference!), or we sleepwalk into a new era of chaos and upheaval. A timely and compelling read, MegaThreats is a wake-up call for humanity.” ―Ian Bremmer, President of Eurasia Group and author of The Power of Crisis
“A tour de force drawing on economics, finance, history, international relations, and Nouriel Roubini’s own rich personal experiences. This clever and timely analysis does more than render accessible complex and crucial concepts that are both in our present and future. It also powerfully illustrates how the combination of flawed human judgment, faulty policies, and a collective disregard of natural constraints now confronts us with perils whose reach goes well beyond just our generation. Ignore this book at your own peril.”―Mohamed A. El-Erian, author of New York Times bestsellers The Only Game in Town and When Markets Collide
“The economist who predicted the 2008 recession is looking around the corner to anticipate the next major crises. Dr. Doom isn’t here to scare you—his goal is to prepare you. The better you are at anticipating problems, the better positioned you become to prevent them and solve them.”―Adam Grant
“Calm, clear-headed and possibly prescient, MegaThreats combines important historical analogies, broad-ranging discussion of current trends, and insightful economic analysis to produce a bracing assessment of long-term risks to the global economy. Dark, perhaps, but brilliant, for sure.”
―Kenneth Rogoff, co-author of This Time is Different
“If recent history has taught us one thing, it is that Black Swan events happen—and more frequently than we expect. Nouriel Roubini describes the most threatening swans and how we can avoid being pecked to death. Technology offers solutions but, as Nouriel warns, technology without political will buys us nothing. This is not an optimistic forecast, but it is a sobering and necessary one.” ―Barry Eichengreen, George C. Pardee & Helen N. Pardee Chair and Distinguished Professor of Economics and Political Science, University of California, Berkeley
“[Roubini’s] analysis of present-day trends, especially in economics, is well-informed and insightful, and will give readers much disquieting food for thought.” ―Publishers Weekly