Have we seen the end of 80 years of increasing global prosperity and relative peace? The global institutions that kept the world functioning since the end of World War Two have proved spectacularly unable to keep the world moving in a positive direction in the past couple of years. Economist Eswar Prasad, a senior fellow at the Brookings Institution and a professor at Cornell University, says ina new bookof the same name, that we’ve entered the “Doom Loop” and we’ll have to reinvent the world to survive it. We asked him if the glass might be half full, after all.
BBTW Editor Peter S. Green: So what is the Doom Loop?
Eswar Prasad:Economics, domestic politics, and geopolitics are stuck in a negative feedback loop and bringing out the worst in each other. We’re at a point right now where these three have become very closely intertwined in a way that you cannot pull them apart, so each ends up reinforcing the other in a negative way. Globalization was seen as a positive-sum game where everybody could benefit from freer trade. It would be a balancing force that offset the zero-sum game of geopolitics. It did improve GDP across the world, especially in emerging markets and developing countries. The problem is that the benefits were not evenly shared, either within countries or among countries. What was supposed to be a force for good has ended up infecting domestic politics, and it’s also ended up infecting geopolitics. And of course, the effects on domestic politics have had a further negative effect on geopolitics. So it all turns into a sort of vicious spiral, where we are fast-moving toward a world where instability becomes the norm.
So globalization is to blame for the current world disorder?
In many democratic countries, the benefits of globalization were not evenly shared, and there wasn’t a good social safety net in place to help those left out. They feel left out not just because they lost their jobs in the process of transition, but they feel that opportunities to climb back up the economic ladder are gone. And second is the feeling that the whole democratic process has been captured by the economic and political elites, so the elites get the benefits of globalization. That has certainly opened very fertile ground for false populists, who claim to have the interests of the common man at heart, to play to the politics of resentment, blaming China or foreign companies or immigrants as the source of a country’s economic woes, rather than accounting for factors like technology, which are affecting everybody. And second, government policies are not serving those at the lower end of the economic ladder well.
So the old rules are dead. What now?
One potential force of stability amid all this chaos could be if everybody agrees upon a common set of rules of the game, and this is particularly true in the international sphere. Now, the United Nations, the World Trade Organization, the IMF, this entire group of organizations is losing legitimacy from both sides. Advanced countries like the United States feel that these organizations have been co-opted by the smaller emerging market countries and that some of them, especially China, are getting a free pass. The emerging market economies, especially China, but others as well, feel that these organizations have been captured by the advanced economies, especially when you think about places like the IMF and the World Bank, where voting rights are distributed according to old economic power rather than new economic power. This has cost these institutions their legitimacy and their credibility. At the same time, emerging market countries led by China are setting up their own institutions, like the Asian Infrastructure Investment Bank. So rather than having cohesion through a common set of rules, we’re getting fragmentation of the rules of the game.
So where does this go? What’s the next phase for all of this?
The dynamics of the doom loop are such that rather than moving towards a world of stability, we are stuck with instability being the norm for some time, with these two superpowers, neither of whom is seen as reliable or trustworthy, and we have the other middle power sort of bouncing back and forth. So it’s going to be a very unstable world.
That’s pretty gloomy. Is there any hope?
It will take a lot of work. And it will not be happening anytime soon. It will take citizens getting much more engaged, not just as citizens of our countries looking at our short-term interests, but as citizens of our communities and of the world, recognizing that really shared prosperity is the only way all of us can do better. Second, it will take leaders: Community, business, national leaders who can help us see beyond our short-term interests and prejudices. And third, it will take better institutions, good democratic institutions, including the rule of law, an independent central bank, and a system of checks and balances at the domestic level.
(This interview has been condensed and edited for clarity)
Big Businesses mentioned this week:
$SBUX ( ▼ 2.08% ) $AMZN ( ▼ 1.49% ) $UPS ( ▲ 2.29% ) $WBD ( ▼ 0.8% ) $NFLX ( ▼ 1.86% ) $PSKY ( ▼ 2.38% ) $UNH ( ▼ 0.46% ) $CVS ( ▲ 0.34% ) $HUM ( ▲ 1.03% ) $SMG ( ▲ 3.81% ) $VREOF ( ▼ 1.64% ) $NVDA ( ▲ 0.63% ) $GM ( ▲ 1.5% ) $TSLA ( ▼ 3.55% )
The usual suspects
- Starbucks makes more bucks, but its shares still lose bucks: Forget the Venti Iced Caramel Macchiato with almond milk and an extra shot of espresso: Starbucks $SBUX ( ▼ 2.08% ) CEO Brian Niccol says the coffee company’s new healthy options, like the Caramel Protein Latte, are the future. Maybe he’s onto something? A year-long revamp to make the company’s coffee shops more appealing (while shutting 600 underperforming stores, opening 128 new ones, and firing 2,000 corporate employees) pushed revenue up 6% in the fiscal first quarter, even as the makeovers, along with rising coffee prices, tariffs, and higher wages for baristas, pushed profits down 63% from a year earlier. Then again, shares fell 6.7% on Wednesday after the earnings announcement.
- Freddy Kruger meets Amazon and UPS: It’s slasher time at two of America’s largest employers, and one reason is that the two shipping giants are arch rivals. You forgot Amazon $AMZN ( ▼ 1.49% ) was in the shipping business? UPS $UPS ( ▲ 2.29% ) sure hasn’t. A year ago, UPS said it would cut the volume of Amazon packages it handles by half over 18 months, because the delivery deal was hurting its margins. Amazon packages accounted for about 25% of UPS’ deliveries but just 11% of its profits. A year on, the Amazon-slim seems to be paying off. Boosting its margins seems to have helped UPS’ stock, at least. UPS on Tuesday projected 2026 revenue of $89.7 billion, above analyst forecasts of $88 billion, sending shares up 5%. But the next day, the share price plummeted, ending Wednesday down 2.6% from its Tuesday open. Last year, Amazon Logistics shipped 6.3 billion parcels to UPS’ 4.7 billion. It’s on track to overtake the U.S. Postal Service, the industry leader, with 6.9 billion packages shipped in 2025. No wonder UPS said it’s laying off 30,000 workers this year. Last year, UPS pink-slipped 14,000 managers and 34,000 operations workers. Meanwhile, Amazon said it’s making its own job cuts: It’ll fire 16,000 more corporate employees, following the mass firing of 14,000 white-collar workers in October, largely due to the boom in AI capabilities. That 30,000 is close to 10% of Amazon’s workforce.
- Add one more suitor for Warner Brother Discovery $WBD ( ▼ 0.8% ) : While Netflix $NFLX ( ▼ 1.86% ) seems to have the upper hand over poorer rival Paramount Skydance $PSKY ( ▼ 2.38% ) , big-time media entrepreneur and Democratic Party donor Barry Diller wants to buy CNN, once WBD has sold its film studio, entertainment assets, and catalogue to Netflix. The Wall Street Journal reports that Diller told $WBD ( ▼ 0.8% ) of his interest last spring, but WBD said this week that CNN is not for sale. It’s not clear how Diller would finance the purchase. In related news, the GOP chair of the Senate‘s anti-trust committee sent a letter to WBD and Netflix bosses saying the planned sale raised “serious antitrust issues.” Paramount owners Larry and David Ellison are close allies of President Trump.
- Health insurers take a dive. It kinda sucks to be in a business that depends on the government for a big chunk of its income. That’s a lesson shareholders in UnitedHealth Group $UNH ( ▼ 0.46% ) and several other major insurers learned this week, when the government’s Center for Medicare and Medicaid Services decided to raise reimbursement rates for 2027 by an average of just 0.09%. Last year’s raise was 5%. It surprised the insurers and their investors. Shares in UnitedHealth dropped 19% on Wednesday, and Centene $CNC ( ▲ 3.25% ) was down 11%. CVS $CVS ( ▲ 0.34% ) fell 15%, but was down just 11% by midday Thursday. Humana $HUM ( ▲ 1.03% ) , with 17% of the Medicare Advantage market, fell 26% through Thursday morning. UnitedHealth has 30% of the Advantage market. It reported 2025 earnings this week, down 41% from 2024 to $19 billion, and said revenue will fall 2% this year, its first drop since 1989.
- Finding Value: Gold prices have shot up to over $5,100 an ounce, doubling in the past year, with investors looking for a safe haven as the long-term health of the U.S. economy gets worrisome. Meanwhile, the U.S. dollar is looking a little glum. It hit a four-year low against the euro on Wednesday, at $1.19. Investors saw more growth in Germany and less risk of a budget cliff in France. But the big driver? U.S. policy. America’s unpredictable recent moves on Greenland have reignited the “Sell America” trade, even after President Trump reassured the audience at Davos that he wouldn’t “use force” to take over the country. That should have sent metal prices falling, Chris Weston, head of research at Pepperstone, told Reuters. Instead, he noted, “Gold increasingly looks like a hedge against Trump as the U.S. president and the absolute unpredictability that comes with it.” There’s silver, too, and it’s having an odd knock-on effect. A 500% hike in the price of silver over the last year has hit manufacturers that use the metal in everything from electronics to solar panels. Now they’re all looking to cut back, as silver now accounts for about 26% of the cost of a solar panel, compared to just 3% three years ago.
The short stack
- Cutting Grass: Lawn care company Scotts Miracle-Gro $SMG ( ▲ 3.81% ) has agreed to dump its cannabis-supply business, innocently labeledHawthorne Gardening, to Canadian cannabis firm Vireo Growth $VREOF ( ▼ 1.64% ) . Scotts said the reefer business had been a drag on its growth in recent years and wants to go back to its non-hemp gardening business. Interest in Scotts’ cannabis cultivation materials and equipment was high during the pandemic. Scotts will get a 13% stake in Vireo, whose shares are down 88% since their 2019 debut. But it’s not curtains yet for the cannabis market. Sales of beverages containing hemp-derived THC are rising as consumers practicing Dry January look for “the buzz without the booze,” the New York Times reports. Last year THC beverage sales were $850 million in the U.S., and should hit $4 billion by 2028, according to Future Markets Insight. One big new consumer of THC drinks? Soccer moms, says the Times.
- Aircraft engines: You never really think about the engines when you’re up in the air, but supply chain squeezes and demand for quieter, fuel-efficient engines has sent the price of a turbofan shooting up. A pair of new engines used for parts can now account for as much as 80% of the cost of a new aircraft, up from 20%-30% a decade ago, according to a report by aviation consultants Avolon. The result: shares in jet engine maker Rolls-Royce $RLLCF ( ▲ 3.85% ) have grown in value almost as fast as Nvidia $NVDA ( ▲ 0.63% ) , at 1209% in five years versus 1,366% for the chipmaker.
- Generally Motivated: General Motors $GM ( ▲ 1.5% ) CEO Mary Barra promised great returns for investors in 2026, and the market responded instantly, with shares up more than 8% on Tuesday. Promising profits between $13 and $15 billion, despite a $3.3 billion loss last quarter after it rolled back EV production, reacting to tariffs and the end of federal EV subsidies for car buyers. GM said it would raise its dividend by 6% and buy back $6 billion in shares. It’s bought back $23 billion since late 2023. Barra also tore into Canada’s plan to roll back tariffs on the first 49,000 Chinese EVs sold there this year. “I can’t explain why the decision was made in Canada,” Barra told GM employees on Tuesday. But most other people could tell her: The deal is a result of Canada’s anger over Trump’s tariffs and the resulting shutdown by U.S. carmakers of some Canadian car plants.
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Elon’s World
- Tesla $TSLA ( ▼ 3.55% ) continues to break investors’ hearts: Annual revenue dropped 3% last year, and profits in the fourth quarter dropped 61% while operating expenses rose 39%. More importantly, people just aren’t buying Teslas: Sales plunged 16% in the first quarter and 8.6% for the whole year. Responding to the lack of new designs, Musk said he’d stop production of the 2012 Model S and 2015 Model X cars, and spend $20 billion to convert the car factories into production lines for humanoid robots. Meanwhile, after getting Tesla’s stock to pop 4% last week with the news that Tesla had started Robotxi rides in Austin with no human safety monitor, it appears that no one has actually gotten in an unmonitored Tesla taxi, according to tech site Electrek. Shares in Tesla are down more than 8.5% in the past month.
- A date is set for the IPO of SpaceX: June 28th. It’s not only Elon Musk’s 55th birthday, it’s when Jupiter and Venus apparently align, according to multiple press reports. While no details have been confirmed, Musk is reportedly seeking $50 billion from investors, valuing the company at $1.5 trillion. It was valued at $400 billion after its last share sale. Musk said last year that the company was expected to generate $15.5 billion in revenue in 2025, 80% of that from Starlink, which it owns. Musk owns about 42% of SpaceX. That price tag — 100X revenue is a “monster premium,” Neil Wilson, an analyst at Saxo Capital Markets, told The Guardian. “A valuation that big reflects not just a tech and AI premium, but Elon Musk’s stardust and a frothy market, plus a heck of a lot of media narrative,” he said.
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Peter S. Green is a veteran reporter and editor who has spent more than two decades covering business and finance from Eastern Europe to New York City, and has worked for Bloomberg News, The New York Post, The New York Times and The Messenger. He lives in New York City and is always looking for the next big story.
