Voice

Nouriel Roubini

He may not be perfect, but there's never been a better time to be in the prophet of doom business.

See Slavoj Zizek on how capitalism won the recession. 

The Great Recession may have been the best thing ever to happen to Nouriel Roubini. Once a relatively obscure academic macroeconomist, he won fame as "Dr. Doom," the man who predicted, in 2006, just how and when the global financial system would collapse. So how have the last few years treated him? Business has been good -- very good. His forecasting record? Not quite.

Even before his prophetic prediction, Roubini had branched out from an economics professor's typical activities. In 2004, he transformed his personal website into a small research firm that became known for the "RGE Monitor," a high-end, subscriber-only collection of news and views about the global economy. These days, his name has become the bigger brand; the old RGE URL redirects to roubini.com, where his self-described "ugly" face greets every visitor.

The mind behind that face is now the linchpin of an eight-figure business. "We started with five people in 2005, and now we employ almost 100," Roubini told me. "We started in New York, and now we have a big office in London and now also in New Delhi. We started with global macro, and now we've hired a bunch of strategists who derive the asset-pricing implications of our views."

And views are one commodity Roubini has in abundance. He's a fixture on the smarter late-night talk shows and even showed up on the big screen in Oliver Stone's Wall Street: Money Never Sleeps (with the apt credit "Economist on TV"). He has argued forcefully that the Federal Reserve should make more targeted purchases of securities -- which it finally started doing in September, to the tune of $40 billion per month -- and that consumers' debts, including mortgages and credit cards, need more restructuring to extend and reduce payments. So far, though, he thinks the Fed has done a better job addressing the downturn than counterparts such as the European Central Bank.

He's also sure that the downturn could have been much worse without a strong policy response from the major economies around the world. "The Great Recession could have turned into a Great Depression 2.0 if we had not adopted very aggressive monetary and fiscal easing," he told me. Indeed, as a quick review of his forecasts over the course of the recession shows, things have turned out quite a bit better than he expected.

In April 2009, Roubini predicted that the U.S. economy would shrink in the second half of the year and that it would manage to grow only 0.5 to 1 percent in 2010. Despite a lot of headwinds, the economy managed to expand through all six quarters at an average annual rate of about 2.5 percent. A few months later, he suggested that the unemployment rate would soon hit 10 percent and then peak at 11 percent in 2010. It did indeed hit 10 percent in October 2009 but has been lower in every month since.

So was Roubini wrong? He wouldn't go that far. "What I've been saying, and I think that has been correct, is that the recovery will be anemic and off-trend because there's a painful process of deleveraging," he said. "I think I got it much better than the consensus. Could things in the U.S. be even weaker? Yes, but not much weaker."

Roubini has also been fond of forecasting a "perfect storm" for the global economy; he used the phrase in August 2008 to reiterate his fears of a global financial crisis and recession. But he also saw a "perfect storm" on the horizon in 2009 because of rising oil prices, taxes, and government bond yields. The hurricane never materialized, but that hasn't stopped him from warning of another one next year -- this time because of America's fiscal cliff, the never-ending crisis in the eurozone, and a hard landing for China's overheated economy.

Of course, predictions don't have to be right to be effective. If Roubini's direst pronouncements don't turn into reality, he can probably claim some of the credit for having alerted leaders to potential problems. And when it comes to his long-term views about economic fluctuations, he's sticking to his guns.

For example, when the price of gold topped $1,200 an ounce in December 2009, Roubini said it looked "suspiciously like a bubble." This past September gold was trading at about $1,700 -- it peaked around $1,900 at the same time last year -- but he still thinks it's a risky bet. "Gold has no intrinsic value," he said. It would take "another Armageddon" to make it rise in value again, he added, and in that case investors would probably be better off buying "spam, guns, and ammunition."

He also continues to worry that the United States relies too much on foreign capital to finance government spending and private-sector investment. The country's imbalances in trade and capital flows have narrowed since their peak in 2006, but not enough for Roubini to rest easy. He still sees a risk, though perhaps a distant one, that foreign creditors will lose confidence in the dollar and "pull the plug."

These are weighty concerns for any economist, especially one with a brow as permanently furrowed as Roubini's, but they don't stop him from having a good time. "I love what I do, and for me it's not work," he said. "I get a lot out of what I do intellectually. These are the most interesting times that anyone involved in macro could think of -- maybe too interesting."

See Kate Sheppard on how climate deniers won the recession. 

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Argument

Capitalism

How the left lost the argument.

See Stephen Galloway on how Hollywood won the recession. 

One might think that a crisis brought on by rapacious, unregulated capitalism would have changed a few minds about the fundamental nature of the global economy.

One would be wrong. True, there is no lack of anti-capitalist sentiment in the world today, particularly as a crisis brought on by the system's worst excesses continues to ravage the global economy. If anything, we are witnessing an overload of critiques of the horrors of capitalism: Books, newspaper investigations, and TV reports abound, telling us of companies ruthlessly polluting our environment, corrupted bankers who continue to get fat bonuses while their banks are bailed out by taxpayer money, and sweatshops where children work overtime.

Yet no matter how grievous the abuse or how indicative of a larger, more systemic failure, there's a limit to how far these critiques go. The goal is invariably to democratize capitalism in the name of fighting excesses and to extend democratic control of the economy through the pressure of more media scrutiny, parliamentary inquiries, harsher laws, and honest police investigations. What is never questioned is the bourgeois state of law upon which modern capitalism depends. This remains the sacred cow that even the most radical critics from the likes of Occupy Wall Street and the World Social Forum dare not touch.

It's no wonder, then, that the optimistic leftist expectations that the ongoing crisis would be a sobering moment -- the awakening from a dream -- turned out to be dangerously shortsighted. The year 2011 was indeed one of dreaming dangerously, of the revival of radical emancipatory politics all around the world. A year later, every day brings new proof of how fragile and inconsistent the awakening actually was. The enthusiasm of the Arab Spring is mired in compromises and religious fundamentalism; Occupy is losing momentum to such an extent that the police cleansing of New York's Zuccotti Park even seemed like a blessing in disguise. It's the same story around the world: Nepal's Maoists seem outmaneuvered by the reactionary royalist forces; Venezuela's "Bolivarian" experiment is regressing further and further into caudillo-run populism; and even the most hopeful sign, Greece's anti-austerity movement, has lost energy after the electoral defeat of the leftist Syriza party.

It now seems that the primary political effect of the economic crisis was not the rise of the radical left, but of racist populism, more wars, more poverty in the poorest Third World countries, and widening divisions between rich and poor. For all that crises shatter people out of their complacency and make them question the fundamentals of their lives, the first spontaneous reaction is not revolution but panic, which leads to a return to basics: food and shelter. The core premises of the ruling ideology are not put into doubt. They are even more violently asserted.

Could we in fact be seeing the conditions for the further radicalization of capitalism? German philosopher Peter Sloterdijk once told me that, if there is a person alive to whom they will build monuments 100 years from now, it is Lee Kuan Yew, the Singaporean leader who did more than anyone else to promote and implement the marriage of capitalism and authoritarianism -- an arrangement he euphemistically referred to as "Asian values." The virus of this authoritarian capitalism is slowly but surely spreading around the globe, nowhere more so than China.

Faced with today's explosion of capitalism in China, analysts often ask when political democracy as the "natural" political accompaniment of capitalism will enforce itself. But what if the promised democratization never arrives? What if China's authoritarian capitalism is not a stop on the road to further democratization, but the end state toward which the rest of the world is headed?

Leon Trotsky once characterized tsarist Russia as "the vicious combination of the Asian knout [whip] and the European stock market," but the description applies even better to today's China. In the Chinese iteration, the combination may prove to be a more stable one than the democratic capitalist model we have come to see as natural.

The main victim of the ongoing crisis is thus not capitalism, which appears to be evolving into an even more pervasive and pernicious form, but democracy -- not to mention the left, whose inability to offer a viable global alternative has again been rendered visible to all. It was the left that was effectively caught with its pants down. It is almost as if this crisis were staged to demonstrate that the only solution to a failure of capitalism is more capitalism.

See Daniel Altman on how Nouriel Roubini won the recession. 

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