Annual Review 2019
Martin Wolf
by Martin Wolf

Martin Wolf: "We need new cooperative institutions"

Martin Wolf is chief economics commentator at the Financial Times. In September 2019, he spoke at the White & Case event “Building resilience for a more fragile future” in London, where he discussed factors that may be undermining economic and geopolitical stability. The following Q&A is an edited and condensed version of a discussion that took place after that event.

Q: You’ve noted that financial crises always create populist backlashes. Does history tell us anything about how long they last?

A: How quickly things are resolved depends on the scale of the crisis, the difficulty of dealing with its aftermath and what has gone before it. The most famous crisis was the Great Depression and its aftermath. That wasn’t resolved until the Second World War was over. If you take the stock market crash in 1929 as the beginning, that’s 16 years. We haven’t had an upheaval like that. Yet we seem to be moving from a relatively peaceful, cooperative world to a much more fractured world. I fear it will be a long time before everybody feels that the economic system is working well, we’re confident in our leaders, and there’s a sensible way of dealing with our problems and keeping a cooperative world order.

Q: There’s a lot of talk about the demise of the post-war order. What does that represent?

A: The fundamental idea of the post-war order is that countries needed to balance doing two things at the same time: looking after the interest of the citizenry as a whole, because that’s the basis of democracy, and cooperating effectively with other nations to manage the many problems we have in common. I think that we do need change. It’s obvious that the global order created by the Western powers is not enough to run the world now. But we need new cooperative institutions to deal effectively with great global challenges. We have to cooperate, in my view, even more intensely than before.  

Q: Is the news all bad? 

A: I’m not completely pessimistic. If you look at the world as a whole, the past 30 to 40 years have seen remarkable progress. There has been a dramatic reduction in extreme poverty and a significant reduction, for the first time since the early 1800s, in global inequality. We have seen enormous technological progress, some of it providing us with immense benefits. But it is also important to be clear that some things are going very badly wrong.

Q: What can companies do to build resilience in this environment?

A: It depends on the nature of your business and the time cycle on which your business operates. If you don’t have to make huge investment decisions of a long-cycle kind that determine the global structure of your business, it’s about being as flexible as you possibly can so you can adjust to whatever may happen. But a lot of the most important businesses have to structure production on a relatively long-term basis. For them, there are two ways to go, both of which have problems. One is to minimize the risks by going local—but this raises your costs structurally. If you move production back home and your competitors don’t, and they turn out to be right, you’re in trouble. Alternatively, you can postpone administrative decisions and wait to see what happens. But it might be many years before things settle down, in which case very important opportunities will be foregone. There just aren’t nice answers, and I think that’s why all this uncertainty is being generated. 

Global income growth by income segment, 1980 – 2016

Elephant in the room

The elephant curve, so-called because it resembles an elephant with its trunk raised above its head, shows global income growth across income segments from 1980 to 2016. Top earners were the biggest winners, represented in the last third of the trunk. But the poor also benefited significantly, which is reflected in the head. With the rise of emerging markets, more than a billion people were lifted out of poverty—and as Martin Wolf notes, this shrank inequality at the global level. In North America and Western Europe, however, income growth stagnated for the vast majority of the population, even as it rocketed for top earners. This dynamic may have contributed to dissatisfaction and social unrest in the West, fueling the populist backlash that Wolf discusses.

Data source: World Inequality Report 2018, World Inequality Database (


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