Shifting Macro Trends in the Aftershock Economy

PIMCO’s Global Advisory Board discusses economic and geopolitical factors shaping the long-term global outlook.

The members of PIMCO’s Global Advisory Board, a team of world-renowned macroeconomic thinkers and former policymakers, recently joined the discussion at PIMCO’s annual Secular Forum, where they addressed critical factors likely to shape the global economy over the five-year horizon. The board’s insights constitute a valuable input into PIMCO’s investment process, and the views they presented helped inform the latest Secular Outlook, “The Aftershock Economy.” The discussion below is distilled from their far-ranging conversation.

Q: What are some global macroeconomic and geopolitical trends that are likely to have an impact over the secular horizon?

A: We see three seismic shifts. First, we are moving from a unipolar world centered on U.S. hegemony toward a more multipolar world, with the U.S. still the leading state but also multiple centers of power. Second, we are shifting from the neoliberal economics of the last 30 years to a neomercantilist economics, in which in various countries and to varying degrees the state is intervening far more in trade, technology, industrial policy, and much more. Third, and partly as a result of this, we are moving from what was an era of hyper-globalization to what we could call globalization-lite, with shorter supply chains, reshoring, and “friend-shoring” in vogue, but not deglobalization and not “slowbalization” (because trade in services is rising).

Underlying these three changes is rising nationalism – e.g., America First (or Buy America), China First, Russia First. This mindset sees the world in terms of a struggle between “us” and “them” and shifts away from a win-win economics through trade toward the dominance of a zero-sum scenario in which you have to lose for me to win. Such populist – and even xenophobic – nationalism and protectionism will lessen global trade, slow global growth, and contain within it inflationary and fiscal pressures, but also could pose an existential crisis if they leave no room for cooperation even if global problems such as climate change, pandemic preparedness, or financial stability require global responses.

We also see a new “resource nationalism” as countries with metallic resources take more state control in a race to acquire in-demand materials such as nickel in Indonesia, copper in Peru and Chile, cobalt in the Democratic Republic of the Congo, and rare earths in China.

In a fading unipolar world, traditional attachments are weakening, countries such as India are playing America, Russia, and China against each together, and we see opportunistic liaisons forming and increasing: the expansion of the BRICS group beyond the five countries of Brazil, Russia, India, China, and South Africa; a growing Saudi–China alliance, and South Africa–Russia–China military cooperation. At the same time, with its focus on regional and bilateral alliances, the U.S. seems less interested in leveraging international institutions it helped to create, including the G-20, the International Monetary Fund, and the World Trade Organization.

Big advances in the implementation of AI and related technologies could turbocharge productivity and growth by the end of the secular horizon, but ultimately, all these geopolitical trends above help explain and reinforce current forecasts of lower global growth.