With the world's industrial democracies in crisis, two competing narratives of its sources - and appropriate remedies - are emerging.
The first, better-known diagnosis is that demand has collapsed because of high debt accumulated before the crisis. Households - and countries - that were most prone to spend cannot borrow any more.
To revive growth, others must be encouraged to spend - governments that can still borrow should run larger deficits, and rock-bottom interest rates should discourage thrifty households from saving.
Under these circumstances, budgetary recklessness is a virtue, at least in the short term. In the medium term, once growth revives, debt can be reduced and the financial sector curbed so that it does not inflict another crisis on the world.
This narrative - the standard Keynesian line, modified for a debt crisis - is the one to which many governments, central banks and economists have subscribed. It needs little elaboration. Its virtue is that it gives policymakers something clear to do. Unfortunately, despite past stimulus, growth is still tepid, and it is increasingly difficult to find sensible new spending that can pay off in the short run.
Attention is therefore shifting to the second narrative, which suggests that the advanced economies' fundamental capacity to grow by making useful things has been declining for decades, a trend that was masked by debt-fuelled spending.
More such spending will not return these countries to sustainable growth. Instead, they must improve the environment for growth.
The second narrative starts with the 1950s and 1960s, an era of rapid growth in the West and Japan.
Several factors - including postwar reconstruction, the resurgence of trade after the protectionist 1930s, the introduction of new technologies in power, transport and communications across countries, and expansion of educational attainment - underpinned the long boom.
But, as Tyler Cowen has argued in his book The Great Stagnation, once these "low-hanging fruit" were plucked, it became much harder to propel growth from the 1970s onwards.
Meanwhile, as Wolfgang Streeck writes persuasively in New Left Review, democratic governments, facing what seemed, in the 1960s, to be an endless vista of innovation and growth, were quick to expand the welfare state. But, when growth faltered, this meant that government spending expanded, even as state resources shrank. For a while, central banks accommodated that spending. The resulting high inflation created widespread discontent, especially because little growth resulted. Faith in Keynesian stimulus diminished, though high inflation did reduce public-debt levels.
Central banks then began to focus on low and stable inflation as their primary objective, and became more independent of their political masters.
However, deficit spending by governments continued apace, and public debt as a share of GDP in industrial countries climbed steadily from the late 1970s, this time without inflation to reduce its real value.
Recognising the need to find new sources of growth, the US in the 1980s deregulated industry and the financial sector, as did Britain. Productivity growth increased substantially in these countries over time, which persuaded continental Europe to do likewise.
Yet this growth was not enough, given previous governments' generous promises of health care and pensions - promises made even less tenable by rising life expectancy and falling birth rates. Public debt continued to grow. And the incomes of the moderately educated middle class failed to benefit from deregulation-led growth - although it improved their lot as consumers.
The most recent phase of the advanced economies' frenzied search for growth took different forms. In some countries, most notable among them the US, a private-sector credit boom created jobs in low-skill industries and precipitated a consumption boom as people borrowed against overvalued homes. In other countries, a government-led hiring spree created secure jobs for the moderately educated.
Three powerful forces, one hopes, will help to create more productive jobs: better use of information and communications technology (and new ways to make it pay), lower-cost energy as alternative sources are harnessed, and sharply rising demand in emerging markets for higher-value-added goods.
The advanced countries have a choice. They can act as if all is well, or they can treat the crisis as a wake-up call to fix what debt has papered over in the past few decades.
For better or worse, the narrative that persuades these countries' governments and publics will determine their future - and that of the global economy.
Raghuram Rajan is a professor of finance at the Booth School of Business in Chicago and the author of Fault Lines: How Hidden Fractures Still Threaten the World Economy
* Project Syndicate
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UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
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Specs
Engine: Dual-motor all-wheel-drive electric
Range: Up to 610km
Power: 905hp
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Price: From Dh439,000
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Test
Director: S Sashikanth
Cast: Nayanthara, Siddharth, Meera Jasmine, R Madhavan
Star rating: 2/5
At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
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Citizenship-by-investment programmes
United Kingdom
The UK offers three programmes for residency. The UK Overseas Business Representative Visa lets you open an overseas branch office of your existing company in the country at no extra investment. For the UK Tier 1 Innovator Visa, you are required to invest £50,000 (Dh238,000) into a business. You can also get a UK Tier 1 Investor Visa if you invest £2 million, £5m or £10m (the higher the investment, the sooner you obtain your permanent residency).
All UK residency visas get approved in 90 to 120 days and are valid for 3 years. After 3 years, the applicant can apply for extension of another 2 years. Once they have lived in the UK for a minimum of 6 months every year, they are eligible to apply for permanent residency (called Indefinite Leave to Remain). After one year of ILR, the applicant can apply for UK passport.
The Caribbean
Depending on the country, the investment amount starts from $100,000 (Dh367,250) and can go up to $400,000 in real estate. From the date of purchase, it will take between four to five months to receive a passport.
Portugal
The investment amount ranges from €350,000 to €500,000 (Dh1.5m to Dh2.16m) in real estate. From the date of purchase, it will take a maximum of six months to receive a Golden Visa. Applicants can apply for permanent residency after five years and Portuguese citizenship after six years.
“Among European countries with residency programmes, Portugal has been the most popular because it offers the most cost-effective programme to eventually acquire citizenship of the European Union without ever residing in Portugal,” states Veronica Cotdemiey of Citizenship Invest.
Greece
The real estate investment threshold to acquire residency for Greece is €250,000, making it the cheapest real estate residency visa scheme in Europe. You can apply for residency in four months and citizenship after seven years.
Spain
The real estate investment threshold to acquire residency for Spain is €500,000. You can apply for permanent residency after five years and citizenship after 10 years. It is not necessary to live in Spain to retain and renew the residency visa permit.
Cyprus
Cyprus offers the quickest route to citizenship of a European country in only six months. An investment of €2m in real estate is required, making it the highest priced programme in Europe.
Malta
The Malta citizenship by investment programme is lengthy and investors are required to contribute sums as donations to the Maltese government. The applicant must either contribute at least €650,000 to the National Development & Social Fund. Spouses and children are required to contribute €25,000; unmarried children between 18 and 25 and dependent parents must contribute €50,000 each.
The second step is to make an investment in property of at least €350,000 or enter a property rental contract for at least €16,000 per annum for five years. The third step is to invest at least €150,000 in bonds or shares approved by the Maltese government to be kept for at least five years.
Candidates must commit to a minimum physical presence in Malta before citizenship is granted. While you get residency in two months, you can apply for citizenship after a year.
Egypt
A one-year residency permit can be bought if you purchase property in Egypt worth $100,000. A three-year residency is available for those who invest $200,000 in property, and five years for those who purchase property worth $400,000.
Source: Citizenship Invest and Aqua Properties
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Business Insights
- As per the document, there are six filing options, including choosing to report on a realisation basis and transitional rules for pre-tax period gains or losses.
- SMEs with revenue below Dh3 million per annum can opt for transitional relief until 2026, treating them as having no taxable income.
- Larger entities have specific provisions for asset and liability movements, business restructuring, and handling foreign permanent establishments.
2025 Fifa Club World Cup groups
Group A: Palmeiras, Porto, Al Ahly, Inter Miami.
Group B: Paris Saint-Germain, Atletico Madrid, Botafogo, Seattle.
Group C: Bayern Munich, Auckland City, Boca Juniors, Benfica.
Group D: Flamengo, ES Tunis, Chelsea, (Leon banned).
Group E: River Plate, Urawa, Monterrey, Inter Milan.
Group F: Fluminense, Borussia Dortmund, Ulsan, Mamelodi Sundowns.
Group G: Manchester City, Wydad, Al Ain, Juventus.
Group H: Real Madrid, Al Hilal, Pachuca, Salzburg.
FIRST TEST SCORES
England 458
South Africa 361 & 119 (36.4 overs)
England won by 211 runs and lead series 1-0
Player of the match: Moeen Ali (England)
