The notion that the most acute financial crisis since the Great Depression is now a thing of the past sounds unerringly like the politicians who, in August 1914, promised that the Great War would be all over by Christmas. Instead, it was the start of a 30-year crisis that embraced two world wars, an economic slump unrivalled since the dawn of the industrial age, and the rise of brutal totalitarian governments. Just as in 1914, the global balance of power is changing, with China threatening America’s hegemony in the way that America and Germany rivalled Britain a century ago. Just as in 1914, an established economic order has been uprooted. Then it was the Gold Standard, free trade and unrestricted capital flows. Today it is the dollar, free trade and unrestricted capital flows.
Add in the new ingredients – the battle for control over resources and global warming – and everything is in place for a prolonged period of upheaval. There will be periods, similar to that in the middle to late 1920s, when the global economy goes through a benign patch, but the respite will be brief. Even feeble economies show occasional signs of health if they are provided with enough support. But make no mistake: what we have now is a zombie economy that inhabits a netherworld between life and death.