American economist and Tolani Senior Professor of International Trade Policy at Cornell University, Eswar Prasad, in The Doom Loop, brings into sharp and introspective focus the upheaval of the global order through the tectonic shifts reshaping central banking, democratic institutions, and political discourse. The ongoing crisis in West Asia, coupled with President Donald Trump’s penchant for imposing seemingly arbitrary and inexplicably erratic tariffs and even renaming geographical features associated with Canada, lends Prasad’s analysis an almost uncanny prescience.

Prasad devotes considerable space to a discerning dissection of the nebulous China-United States relationship. Driven by an ascendant hyper-nationalism and an abiding faith in the insular tenets of protectionism, the world’s two largest economies are drifting apart rather than converging on issues of existential importance, from climate change to public health. Drawing on his extensive experience as the former head of the International Monetary Fund’s China team, Prasad offers incisive insights into the distinctive features of China’s economic model and its likely future trajectory. China, he suggests, has single-handedly rebuffed the popular consensus that free markets constitute the singular remedy for economic malaise.

However, Prasad is unequivocal in arguing that no system has yet proven superior to free markets in allocating scarce resources and maximizing economic welfare. At the same time, he is prudent not to sentimentalise China’s economic success. The country’s much-vaunted growth model has endured a series of significant shocks, none more telling than the prolonged slump in its property sector. The dramatic collapse of China Evergrande Group, at one time among the world’s most valuable real-estate developers, underscored the systemic vulnerabilities afflicting critical segments of the Chinese economy. When these weaknesses are viewed alongside a shrinking workforce, adverse demographic trends, and an inefficient banking system, the notion of an economic idyll begins to unravel, revealing a far more fragile reality beneath the surface.

Further exacerbating the issue is a slow, but certain shift in the centre of gravity of power from the hegemonic West to a dynamic and vibrant East. However, with the world tilting towards populist mores and elitist prevarications, Prasad minces no words in signalling a warning: “Chronicles of many ancient civilizations reveal a recurring pattern: Extreme concentration of wealth and power among elites typically lead to collapse, with regeneration far from assured” …. When economic and political systems are captured by elites to the detriment of the broader population, they eventually come apart. The rot sets in from within and is difficult to reverse, largely because those responsible for the rot have every incentive to preserve the status quo.”

Prasad does not limit his narrative to a litany of woes. Contending that the doom loop can be stabilised, if not altogether avoided, the author argues for multilateral agencies such as the G-20 to up the ante and not be bogged down by ‘mission creep’. Prasad also wishes for the International Monetary Fund and the World Bank to inculcate a more inclusive and benevolent approach to funding by concentrating on improving the prospects of developing nations instead of providing consistent assistance to developed countries.

Doom Loop – a work of informed prescience.