This past week brought home the magnitude of the overlapping crises assailing the global economy, intensifying fears of recession, job losses, hunger and a plunge on stock markets, The New York Times reported. At the root of this torment is a force so elemental that it has almost ceased to warrant mention — the pandemic. That force is far from spent, confronting policymakers with grave uncertainty. Their policy tools are better suited for more typical downturns, not a rare combination of diminishing economic growth and soaring prices. Major economies including the U.S. and France reported their latest data on inflation, revealing that prices on a vast range of goods rose faster in June than anytime in four decades. Those grim numbers increased the likelihood that central banks would move even more aggressively to raise interest rates as a means of slowing price increases — a course expected to cost jobs, batter financial markets and threaten poor countries with debt crises. The specter of slowing economic growth combined with rising prices has even revived a dreaded word that was a regular part of the vernacular in the 1970s, the last time the world suffered similar problems: stagflation. Most of the challenges tearing at the global economy were set in motion by the world’s reaction to the spread of COVID-19 and its attendant economic shock, even as they have been worsened by the latest upheaval — Russia’s disastrous attack on Ukraine, which has diminished the supply of food, fertilizer and energy. It was the pandemic that prompted governments to impose lockdowns to limit its spread, hindering factories from China to Germany to Mexico. When people confined to home then ordered record volumes of goods — exercise equipment, kitchen appliances, electronics — that overwhelmed the capacity to make and ship them, yielding the Great Supply Chain Disruption. The resulting scarcity of products pushed prices up. Companies in highly concentrated industries from meat production to shipping exploited their market dominance to rack up record profits.
