It’s not often that you get to hear economist and NYU professor Nouriel Roubini—a.k.a. Dr. Doom—being optimistic. Well, ok, relatively optimistic. But that was one of the main takeaways from today’s Time Inc. “The Year Ahead” panel with Roubini, the head of RGE Economics, and his political doppelgänger, Ian Bremmer, the founder and president of Eurasia Group, one of the world’s leading political risk research and consulting firms. I moderated the session, which had the two seers swapping places from years past. As Ian, who laid out his top 10 global risks for the year ahead put it, “I’m getting more pessimistic, and Nouriel is finally becoming more optimistic.”
But only a little. Roubini believes that the U.S. is going to grow about 2.5 percent this year, which is up from predictions of the last few years, but below the consensus. As incoming Fed chair Janet Yellen told me last week, she and the other Fed governors are “hopeful that the first digit [of GDP growth] this year will be 3 rather than 2.” But neither Bremmer nor Roubini was hopeful that it would be enough to close the inequality gap in the US, one of the key goals for President Obama in the remainder of his term.
Like other prominent academics, including Robert Gordon of Northwestern, as well as Erik Brynjolfsson and Andrew McAfee from MIT, Roubini believes that technology is still destroying middle market jobs faster than they can be created, and that the recovery in America will continue to create jobs at the top and the bottom, but not necessarily in the middle. “I fear that much of the U.S. workforce doesn’t have the skill set and education to compete [and capitalize on new technology],” said Roubini. He is also worried that there are new bubbles brewing in the financial markets, given that debt has over the last few years merely changed hands from the private to the public sector. (He adds that Dodd-Frank hasn’t ended the Too Big To Fail problem, echoing many of the points I laid out in my recent “How Wall Street Won” cover story.)
What will it all mean for politics? More polarization, both at home and abroad. Bremmer foresees an era in which old alliances between America and its closet allies—including Israel, Britain, and Japan—start to break down. Old correlations between markets, which are already diverging along geographic and sector lines, will weaken further. Roubini predicts a year of dampened stock market returns, despite lower energy prices—which may be a consequence of the combination of the shale gas and oil revolution in the U.S., and slower growth in China. That won’t be good news for the Middle East, where Bremmer predicts that unrest will expand, and petroautocrats from Iran to Saudi Arabia to Russia may start clamping down further on their populations as they see lower prices threaten their grip on power.
So where’s the good news? Bremmer sees a slower growth China more eager to cut trade deals with the U.S. than in the past. And given it’s growing energy independence, he believes the U.S. will start to make that long predicted “pivot” to Asia, as Chinese economic interests in the Middle East grow, and America’s wane. In every opportunity, of course, is a challenge. Long suffering Syrians may find that Americans are less and less interested in their plight. And the world’s risk heat map will start moving east—conflict of the future may be just as likely to occur in the South China Seas as in Egypt, Iran, or Syria.