Markets react sharply to clear, quantifiable events like tariff announcements but are poor early-warning signals for gradual, harder-to-price risks like the erosion of democratic norms. This creates a dangerous complacency among investors and policymakers.
The period from 1870-1914 mirrors today's super cycle of innovation, wealth concentration, inequality, populism, nationalism, and geopolitical rivalry. This makes it a more relevant historical parallel for understanding current risks than the recent era of hyper-globalization.
As economic tools like sanctions become primary weapons in global competition, the U.S. should develop a formal doctrine with limiting principles, similar to military rules of engagement, to govern their use and prevent a destructive "race to the bottom."
History shows the U.S. has a unique ability for systemic reform in response to crises, such as when the Gilded Age's excesses gave way to the deep structural changes of the Progressive Era. This suggests a capacity to overcome today's political fractures.
PGIM's Daleep Singh argues that the risk of mutually assured destruction prevents direct military conflict between nuclear powers. This channels confrontation into the economic sphere, using tools like sanctions and trade policy as primary weapons of statecraft.