Tariffs, wars, blockades -- why doesn’t the global economy collapse?
Perhaps because no one is in charge
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Over a little more than a year the global economy was hit with a double whammy – the tariff war Donald Trump began in spring 2025, then the joint United States-Israel bombing of Iran that resulted in closing the Strait of Hormuz.
Many expected world economic output to go into a tailspin. There would be recession, a Wall Street crash and shortages everywhere.
Instead no recession, with global GDP growth holding at about 3 percent through the period. The S&P 500 continues to be amazing. Corporate profits remain high. Inflation has rebounded to 3.8 percent but U.S. unemployment is holding at a low 4.3 percent.
If the Strait is impassable for an extended period, oil and gas shortages may develop. So far there’s enough to go around. Enough of everything else too.
That no general tailspin has begun reflects recent positive developments on several scores.
One is petroleum production rising well ahead of population growth in the United States, Saudi Arabia, Kazakhstan, Canada and Algeria, while Brazil and Guyana arrived as oil producers serving the global market.
A second positive development is the AI boom. Laud it or dread it, AI is causing many types of organizations to become more productive. A third is acceleration of progress in several areas of tech, including solar power, factory-floor robots, 3D seismology for locating minerals, and energy-efficiency engineering.
I’d like to propose a larger, more fundamental reason the global economy remains stable. It’s because no one is in charge.
Lots of voices are head. But no person, no government, no international agency, no central bank has control of the global economy.
Global economic output reflects vast numbers of distributed decisions with no one in charge.
You might think someone needs to be in charge for a system to be stable. It’s the other way around. Having no one in charge is what keeps the global economy away from the edge of the cliff.
Suppose the presidents of the United States or China, or the leaders of the European Union or the Fed or the central banks of Europe or Japan, were in charge and could issue orders.
They could make catastrophic mistakes that would not be crosschecked. Or they could attempt to manipulate events for political ends. They could impose outcomes based on what’s trendy in conventional wisdom. Even if their motives were benign, they’d blunder.
Having no one in charge is the solution – and it’s working.
