Ever since the world was hit by a once-in-a-century pandemic, there’s been a lot of talk about “normalization.”

• Federal Reserve Chair Jerome Powell talks about the normalization of aggregate supply conditions and the labor market.
• Homebuilders talk about a return to normal interest rates and market conditions.
• Hotel operators talk about the normalization of leisure and business travel.
• And retailers of all types talk about the normalization of their product mixes (for example, Bath & Body Works Inc. has been selling much less hand sanitizer.)

Here’s the rub: we can’t roll back the clock to 2019’s economy, and nobody knows which “normal” we’re supposedly returning to (sanitizer sales notwithstanding.)

First, there’s the theory that we’re returning to a time before the late 1980s “peace dividend,” credited with ushering in increased global trade, cooperation and prosperity. In this version of the story, the defining features of the coming decade — much like the period from the US involvement in the Vietnam War to the fall of the Berlin Wall — will be a return to geopolitical conflict, recurring supply shocks and higher inflation.

Russia’s invasion of Ukraine brought the “end of the peace dividend” narrative into the mainstream, and it gained further attention with the outbreak of the Israel-Hamas war. Recently, hedge fund billionaires Ken Griffin and Bill Ackman have advanced their versions of the story, and it’s been cited as an explanation for the greater volatility in Treasury bonds.

A sustained period of conflict, of course, would be terrible for humanity, but it’s not clear how that would play for the US economy and markets.

Alarmists argue that it could significantly hamper the march of globalization — a major disinflationary force — but that’s a logical leap that hasn’t really materialized. For all Vladimir Putin’s belligerence, Russia doesn’t even crack the top 20 of US trading partners, and the wars in Ukraine and the Middle East have so far had only short-lived influences on energy markets.

China poses a greater risk, and relations between Beijing and Washington aren’t exactly sunshine and roses. According to a Dec. 20 NBC report citing anonymous US officials, Chinese President Xi Jinping told President Joe Biden in San Francisco that he intends to “reunify Taiwan with mainland China” at some yet-to-be-determined time. Heightened tensions in the Taiwan Strait undoubtedly have the potential to shake global trade, but NBC itself noted that Xi has expressed such sentiments before, and so far, none of that has dramatically affected around $758 billion of annual trade between the two global powers. Despite some hiccups, US imports from China have recently bounced back.

“Peace dividend” defeatists also suggest that the US may have to spend more on defense, exacerbating the deficit problem. That’s plausible, but the US already spends vastly more on defense than any other country and its defense spending as a percent of GDP has been relatively low and stable for the better part of three decades (except for an increase in the 2000s amid simultaneous wars in Iraq and Afghanistan.)

Aid sent to Ukraine hasn’t meaningfully changed that, and the Congressional Budget Office projects defense spending will continue to proportionally decline in the decade ahead. In other words, the economic implications of the recent conflicts may be exaggerated.

Another (more optimistic) take on the “new economic normal” is that it looks something like the late 1990s. That was a time of resurgent growth driven by increasing labor productivity. In the popular imagination, a 2020s productivity boom would look something like the one that accompanied the emergence of the internet, except with the proliferation of artificial intelligence instead of email and e-commerce.

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