Book Review: The Next Age of Uncertainty by Stephen Poloz
In 1977, famed economist John Kenneth Galbraith wrote The Age of Uncertainty (which was also made into a BBC series) in which he predicted a coming period of economic instability, inefficiency and social inequity, and called for government policies and interventions to remedy these problems. Stephen Poloz, the ninth Governor of the Bank of Canada (Canada's central bank) foresees a new similar era in our future, hence the title of his 2022 work The Next Age of Uncertainty: How the World Can Adopt to a Riskier Future. The book's title hints at the author's remedy for managing in the coming uncertain world, though as Poloz makes clear, this is easier said than done, given current political realities.
Poloz explores the history of previous economic downturns and their relationship to past industrial revolutions, using this as a guide to explore what is coming. He notes the presence of five conditions (that he terms "tectonic forces") that will shape the world's economic future: (1) an aging population; (2) technological advancements (especially in artificial intelligence and biotechnology); (3) growing income disparity and inequality; (4) rising debt; and (5) climate change. Each of these portend significant change in the way the world does business. There will be winners and losers. Poloz examines how each of these will affect our future and what they will mean for trends in employment, inflation, housing, and political and social relations, making for very interesting speculation from a credible educated guesser.
There are a number of themes running through the book. The author notes that economics is far from an exact science, and we should be suspicious of those economists who purport to see the future with any degree of certainty. History is always throwing us curveballs that we don't see coming. Recent examples of this are the September 11th terrorist attacks, and the Covid-19 pandemic (a subject that Poloz devotes an entire chapter to.) Most of these are impossible to properly prepare for, hence the need for political policy makers to develop a strong focus on risk management. Battles never play out the way the generals plan them, and so it is with economic policy.
Poloz proffers both pessimism and optimism in his look into the future, the former in reflecting on how many of the policies necessary to meet the coming challenges will call for political courage, something that is in diminishing supply in this age of social media's herd mentality. Cause for optimism arises from the lessons that history has taught us, which in turn have resulted in strong central banks that strive to keep inflation under control through their interest rate policies, though these have been hamstrung in recent times due to rapidly rising government debt. Poloz points out the folly of MMT (modern monetary theory), a new school of economic though that pretends that governments can buy their way out of trouble by printing more money. But Poloz is also optimistic because of the past history of meeting economic challenges bravely and with creativity. As he puts it: "History demonstrates that humanity has a right to be optimistic about the future, for there is no challenge that cannot be overcome with hard work and ingenuity."
The author injects his own life experiences at the start of each chapter as his method of telling the reader that we're all in this together. Sometimes his brilliance outpaces a reader's ability to keep up, as portions of his explanation of economic past cause and effect and anticipated outcomes require a second reading to fully grasp what he is saying. He does not promise easy answers to the challenges that our collective economic future will offer, but he does propose a general direction to head in regard to each of the "tectonic forces." This book reminds us that we should expect and be prepared for changes in our economic future. Risk management should be our mantra.
Poloz explores the history of previous economic downturns and their relationship to past industrial revolutions, using this as a guide to explore what is coming. He notes the presence of five conditions (that he terms "tectonic forces") that will shape the world's economic future: (1) an aging population; (2) technological advancements (especially in artificial intelligence and biotechnology); (3) growing income disparity and inequality; (4) rising debt; and (5) climate change. Each of these portend significant change in the way the world does business. There will be winners and losers. Poloz examines how each of these will affect our future and what they will mean for trends in employment, inflation, housing, and political and social relations, making for very interesting speculation from a credible educated guesser.
There are a number of themes running through the book. The author notes that economics is far from an exact science, and we should be suspicious of those economists who purport to see the future with any degree of certainty. History is always throwing us curveballs that we don't see coming. Recent examples of this are the September 11th terrorist attacks, and the Covid-19 pandemic (a subject that Poloz devotes an entire chapter to.) Most of these are impossible to properly prepare for, hence the need for political policy makers to develop a strong focus on risk management. Battles never play out the way the generals plan them, and so it is with economic policy.
Poloz proffers both pessimism and optimism in his look into the future, the former in reflecting on how many of the policies necessary to meet the coming challenges will call for political courage, something that is in diminishing supply in this age of social media's herd mentality. Cause for optimism arises from the lessons that history has taught us, which in turn have resulted in strong central banks that strive to keep inflation under control through their interest rate policies, though these have been hamstrung in recent times due to rapidly rising government debt. Poloz points out the folly of MMT (modern monetary theory), a new school of economic though that pretends that governments can buy their way out of trouble by printing more money. But Poloz is also optimistic because of the past history of meeting economic challenges bravely and with creativity. As he puts it: "History demonstrates that humanity has a right to be optimistic about the future, for there is no challenge that cannot be overcome with hard work and ingenuity."
The author injects his own life experiences at the start of each chapter as his method of telling the reader that we're all in this together. Sometimes his brilliance outpaces a reader's ability to keep up, as portions of his explanation of economic past cause and effect and anticipated outcomes require a second reading to fully grasp what he is saying. He does not promise easy answers to the challenges that our collective economic future will offer, but he does propose a general direction to head in regard to each of the "tectonic forces." This book reminds us that we should expect and be prepared for changes in our economic future. Risk management should be our mantra.