Overview of Are we in an economic 'doom loop'?
This Planet Money / Indicator episode (NPR) features economist Ishwar Prasad discussing his new book The Doom Loop: Why the World Economic Order Is Spiraling into Disorder. Prasad defines a “doom loop” as a negative feedback cycle where economic shocks, domestic politics, and geopolitics amplify one another — turning stabilizing forces (globalization, institutions, technology) into drivers of instability. He explains how the loop forms, gives concrete examples, and outlines what would be required to break it.
Key points and main takeaways
- Doom loop: economic distress → political backlash → geopolitical fragmentation → more economic distress. The three realms (economy, domestic politics, international relations) feed each other.
- Forces that were meant to stabilize and integrate the world economy are now contributing to instability because their benefits have been uneven or their governance has fragmented.
- Breaking the loop requires civic reorientation (seeing shared interests beyond narrow national or partisan frames), leadership that favors long-term common good, and stronger, more legitimate international institutions. That’s possible but difficult.
Examples of the doom loop (from the episode)
Globalization
- Globalization brought cheaper goods and poverty reduction, but gains were unevenly distributed.
- Displaced or left-behind groups fuel resentment that populist politicians exploit (examples cited: Jair Bolsonaro, Viktor Orbán, Donald Trump).
- Politics of resentment scapegoat “the other” (elites, immigrants, other countries), increasing domestic polarization and international friction.
International institutions
- Postwar institutions (UN, World Bank, IMF) once underpinned cooperation.
- Perceived U.S. disengagement and complaints from emerging economies about biased rules have driven fragmentation.
- Emerging powers (e.g., China) have created alternative institutions (Asian Infrastructure Investment Bank, New Development Bank), reducing the shared rulebook and raising instability risk.
Technology
- Technologies like AI, cryptocurrencies (stablecoins), and social media can benefit societies but also intensify the doom loop.
- Stablecoins and dollar-linked digital instruments could undermine small-country currencies and monetary sovereignty.
- AI and digital platforms tend to concentrate income and power, potentially widening inequality and fueling political backlash.
Why this matters (consequences)
- Fragmentation and mistrust make coordinated responses to crises harder (trade frictions, financial instability, and geopolitical conflict more likely).
- Domestic polarization undermines policy-making and reforms needed to share globalization’s benefits.
- Technological disruption without adequate redistribution or governance can deepen inequality and cross-border tensions.
Solutions and prescriptions (what Prasad proposes)
- Civic mindset: citizens should think beyond narrow identities (national or partisan) toward community and global shared prosperity.
- Leadership: leaders at community, business, and national levels must articulate long-term, inclusive goals and resist short-term populist fixes.
- Institutional reform and renewal: strengthen or rebuild international institutions that are seen as fair and legitimate to manage cross-border issues and provide shared rules.
- These measures are feasible but require sustained political will and societal effort.
Notable quotes / insights
- Doom loop definition: “A cycle where economic conditions, domestic politics, and international geopolitics feed off each other in a negative way.”
- Prasad’s arc: started writing an optimistic book but research convinced him the future looks “quite bleak” unless big changes happen.
- The paradox: tools that promoted integration (trade, institutions, tech) can become sources of fragmentation when benefits are poorly distributed or governance fails.
Actionable takeaways / recommended focus areas
- Policy makers: prioritize inclusive growth policies, social safety nets, and retraining programs to reduce the domestic political backlash from globalization and tech disruption.
- International leaders: work to make global institutions more representative and effective, or risk proliferation of competing bodies.
- Civil society and business: push for governance frameworks for emerging technologies (AI, digital currencies) that protect monetary sovereignty and equitably distribute gains.
- Citizens: support leaders and policies that favor long-term, cooperative solutions over short-term, divisive rhetoric.
Episode details & credits
- Guest/author: Ishwar Prasad, professor of economics and trade policy at Cornell University; author of The Doom Loop.
- Show: Indicator (Planet Money) on NPR; hosts Darian Woods and Adrian Ma.
- Production: Produced by Corey Bridges; engineered by Robert Rodriguez; fact-checked by Sierra Juarez; editors and other credits mentioned in the episode.
- Extras: Episode plugs Planet Money’s book tour and event details.
If you want the main argument in one line: globalization, institutional fragmentation, and unchecked tech changes are interacting to magnify economic and political instability — reversing many of the stabilizing effects economists once expected — and reversing the trend will require concerted civic, political, and institutional reform.