Unfortunately, I’m afraid that progress on structural reforms will be sporadic, at best. The danger is that slow growth will not lead to sufficient wage gains and job creation to defuse the ticking time bomb of high youth unemployment in many countries. Another risk is that reform attempts could provoke a political backlash that would be harmful to long-term investment.
Fifth, let us hope that the eurozone can avoid a currency crisis. This will depend largely on whether German Chancellor Angela Merkel can form a coalition government and restore political stability to Europe’s largest economy.
Sixth, we should hope that the EU and the UK can agree on a reasonable Brexit deal that will preserve fairly strong trade relations. The main risk here is that localized declines in trade could spill over and cause broader harm.
And, beyond Europe, let us hope that negotiations between the US, Canada, and Mexico over the North American Free Trade Agreement (NAFTA) will result in an arrangement that still facilitates continental trade. For trade generally, the biggest risk is that the Trump administration could start a lose-lose trade dispute, owing to its understandable eagerness to help American manufacturing workers.
Seventh, let us hope that new policies targeting information and communication technology (ICT) strike the right balance among all stakeholders’ competing and legitimate concerns. On one hand, there is reason to worry about certain Internet companies’ concentration of market power, particularly in online content and distribution, and about the effects of new technologies on personal privacy, law enforcement, and national security. On the other hand, new technological advances could deliver immense economic gains.
It is easy to envision a scenario of too much regulation, or of too little. It is also easy to envision a large-scale public backlash against the major technology companies, particularly if poor self-policing or a refusal to cooperate with law enforcement leads to some horrible event.
Here, I predict that achieving an appropriate policy balance will take years. If some future event strikes an emotional chord, the public’s mood could swing dramatically. Ultimately, however, I suspect that competition and innovation will survive the forthcoming regulations.
Finally, and most important, let us hope that terrorism is thwarted everywhere, conflicts subside, democracy and capitalism regain some momentum, and greater civility and honest dialogue return to the public domain. Should that happen in 2018, it will be a very good year indeed.
Michael J. Boskin is professor of economics at Stanford University and Senior Fellow at the Hoover Institution. He was chairman of George H. W. Bush’s Council of Economic Advisers from 1989 to 1993, and headed the so-called Boskin Commission, a congressional advisory body that highlighted errors in official U.S. inflation estimates.