Global economic resilience is a temporary lull: a crisis is coming because multilateral institutions cannot manage mounting strains
Source: https://www.theguardian.com/profile/larryelliott. "The global economy is muddling through against the odds. But a storm is coming | Larry Elliott | The Guardian." October 15, 2026. www.theguardian.com
The Gist
The world economy has held up better than anyone expected, but the things propping it up are wearing thin. Meanwhile the institutions that should help countries cope, like the IMF, World Bank and WTO, are weak or have lost their way, and nothing suggests they'll be fixed soon. So the author thinks the calm is just a lull before a storm.
Conclusion
The global economy's current resilience is a postponed crisis rather than a permanently avoided one, because temporary cushions are fading while multilateral institutions are too weak or misdirected to handle the coming strains.
Premises
- The global economy has so far held up better than expected despite regional wars, an energy shock, rising inflation and debt costs, and US-China trade conflict, mainly because of heavy AI investment, drawdowns of oil inventories, and cheap Chinese exports restraining import prices.
- Each of these cushions has a downside or is running out: oil stocks are running low and the Middle East conflict is worsening, cheap Chinese goods threaten Western manufacturing jobs, and AI investment has raised borrowing costs and starved other sectors of capital.
- Governments face contradictory pressures: bond markets and the IMF and Bank of England urge fiscal tightening, while voters want more state action, and the need for national self-sufficiency in fragile supply chains calls for more intervention, yet state capacity is weaker than admitted.
- As globalisation retreats, a strong multilateral system is needed, but the WTO is moribund, and the IMF and World Bank are reluctant to challenge Trump.
- The problems of multilateralism are structural rather than merely a Trump effect: the IMF and World Bank abandoned their Bretton Woods/New Deal principles and now promote footloose capital, private profit and reduced policy space, as reflected in the frontloaded austerity attached to IMF programmes and a narrow definition of success.
- Returning to New Deal principles (policy space, public investment, climate aid, debt relief) would help but is very unlikely to happen soon.
Assumptions
- The temporary factors that have cushioned the economy will not persist or be replaced by new ones
- Sustained Middle East conflict and energy shortages will translate into serious economic damage, not just price volatility
- Effective multilateral coordination is necessary to avert or manage a severe crisis
- A change of US president would not substantially revive multilateral cooperation
- The IMF's austerity-oriented conditionality harms living standards and poverty outcomes, and Kozul-Wright's critique is accurate
- Political and voter backlash would block effective fiscal adjustment