Prof G Markets – "The World Is In a Doom Loop" ft. Eswar Prasad

Date: February 13, 2026 | Host: Scott Galloway & Ed Elson, Vox Media Podcast Network | Guest: Eswar Prasad, Professor of Trade Policy & Economics at Cornell, author of "The Doom Loop"

Episode Overview

In this episode, Scott Galloway and Ed Elson are joined by Professor Eswar Prasad to unpack his latest book, The Doom Loop: Why the World Economic Order is Spiraling Into Disorder. The discussion centers on the growing instability of the global economic system, the doom loop dynamic between economics, domestic politics, and geopolitics, and how themes like globalization, AI, inequality, debt, housing, and education are shaping our collective future. The episode explores why these interconnected feedback loops threaten to unravel social contracts and what reforms are needed.

Key Topics and Insights

1. The Doom Loop: An Overview

• Definition and Origins

  • After the fall of the Soviet Union, the US was the unchallenged economic, military, and financial superpower. But globalization and the rise of China and emerging economies have created a more contested world.
  • Prasad: "Economics, domestic politics, and geopolitics are stuck in this negative feedback loop... they're bringing out the worst in each other." [12:00]

• Globalization's Double-Edged Sword

  • Once seen as a "positive-sum game," globalization is now widely viewed as zero-sum, with each country vying for an upper hand often through protectionism and populist politics.
  • The negative side effects of globalization—particularly uneven distribution of gains—are feeding domestic discontent and giving rise to "the politics of resentment."
  • Prasad: "Globalization worked very well at the aggregate level... but within countries, especially in the US, the benefits were not evenly distributed and it created this very disaffected class." [13:22]

2. Davos 2026 and the New Global Consensus

• Rather than focusing mostly on AI or technology, Davos 2026 was dominated by debates about the future of globalization.
• Mark Carney and other leaders highlighted a world order adrift, with neither the US nor China viewed as fully reliable partners.
  • Prasad: "The rest of the world has to settle in for a period where instability is the norm." [16:15]

3. US Economic Strength vs. Underlying Fragility

• Surface Success:
  • US exhibits exceptional productivity growth post-Covid; financial markets are robust; the economy looks strong relative to China, Europe, and Japan.
  • Prasad: "The US economy... is remarkable... but if you take the doom loop thesis seriously, there are a lot of tensions building up that... are fraying the social fabric." [19:45]
• Beneath the Surface:
  • Exploding deficits, rising debt, growing wealth inequality, and social tensions threaten the US's long-term sustainability.
  • Galloway: "At what point is that (deficit) something below the surface? And if so, when does it appear?" [21:25]

4. Inequality: Income, Wealth, and Social Unrest

• Current Data:
  • Income inequality has not increased as steeply recently, but wealth inequality is soaring, especially among the top 1% and 0.1%.
• Social Impact:
  • Perceived unfairness, system capture by elites, and lack of opportunities are primary sources of unrest, not just the fact of inequality.
  • Prasad: "People accept that there is going to be inequality... but if people feel that the system is unfairly stacked against them, that is a problem." [24:15]
• Galloway on historical corrective mechanisms:
  • "More often the means of correction are war, famine or revolution." [26:46]
• Prasad:
  • "You're absolutely right, there is a risk that we could end up in a much more difficult spot..." [27:01]

5. AI, Technology, and Future Job Displacement

• Optimism vs. Risks:

  • AI has potential to boost productivity and economic dynamism. However, job displacement risk is concentrated among lower-skilled, frontline, and service sector workers.
  • Potential for increased concentration of wealth and opportunity from AI and digital currencies.
  • Prasad: "At Davos, African entrepreneurs were excited about productivity, but... employing fewer workers... was a constant refrain... Benefits might end up becoming much more concentrated, which again feeds into the doom loop dynamics." [35:43]

• On Regulation:

  • Over-regulating could stifle innovation (see Europe), while lack of guardrails could worsen social division.
  • Need balance between dynamic growth and protecting those displaced.

6. Deficit, Entitlements, and Health Care: The Real Fiscal Challenge

• Entitlements and Health Spending

  • $13K per capita healthcare spending; US outcomes still poor.
  • Galloway: "If we're going to have an adult conversation about the deficit, all roads... lead to entitlements and health care." [41:13]

• Prasad:

  • "The entitlements are hugely important... incentives in our system are hugely misaligned... The healthcare system is really gummed up right now." [42:35]
  • Population aging and tighter immigration exacerbate challenges.

• Tax system & solutions:

  • Need for simplified, more efficient tax systems (e.g. value-added tax), more rational spending priorities, untangling military and non-productive expenditure vs. social investment.

7. Housing and Its Social Implications

• Affordability Crisis:
  • Homeownership out of reach for many young Americans; leads to riskier behaviors and delays in wealth building.
  • Galloway: "I believe that it's created a great deal of poor risk taking for young people... housing has become out of reach..." [49:35]
• Supply Problems:
  • Mortgage constraints, regulatory zoning, and government policy failures are key barriers.
  • Prasad: "On the supply side is really the constraint here... there are also regulatory and other constraints..." [50:48]

8. Education System: Asset or Hurdle?

• Rising Costs vs. Declining Access:

  • Higher education costs are outpacing inflation, fueled by restricted supply and inflated pricing at elite institutions.
  • Galloway: "We consistently raise tuition faster than inflation... we sequester or artificially sequester supply such that we have pricing power..." [53:30]

• Broader Problems:

  • Real crisis starts in K-12, especially inner-city schools; universities can't alone fix inequalities rooted in family and social environments.
  • Prasad: "The education system by itself cannot solve the ills of society... but we also need to equip [students] with some real skills..." [54:38]

• International Talent Drain:

  • The US is losing its allure for the global "best and brightest" due to hostility toward immigration and intellect.
  • Prasad: "I fear that America is no longer seen as the Lord Star that the best and brightest around the world look to... People are looking to other parts of the world." [58:48]

9. Policy Solutions and the Role of Institutions

• It's not just about better policy—it’s about rebuilding trust and robustness in democratic, legal, and international institutions.
• Prasad: "We need leaders... who can help us see beyond our short term prejudices... but ultimately... we need solid institutions... This is what I would emphasize: we really need to start rebuilding, reinvigorating our institutions." [61:46]

Notable Quotes & Timestamps

• On the doom loop's essence:

  • "Economics, domestic politics, and geopolitics are stuck in this negative feedback loop... they're bringing out the worst in each other." – Eswar Prasad [12:00]

• On globalization's cost:

  • "Globalization worked very well at the aggregate level... but within countries, especially in the US, the benefits were not evenly distributed and it created this very disaffected class." – Eswar Prasad [13:22]

• On income vs. wealth inequality:

  • "If you look at the overall income accounting for government taxes and transfers, it's not gone up as much... but wealth inequality has certainly gone up." – Eswar Prasad [24:15]

• On social safety nets:

  • “The safety net really doesn't work for a lot of the population… my dog is probably getting much better health care than a large number of people in this country can afford.” – Eswar Prasad [33:27]

• On hope for America's future:

  • "We need solid institutions. ...We really need to start rebuilding, reinvigorating our institutions, because without that everything sort of starts falling apart." – Eswar Prasad [61:46]

• On America losing talent:

  • “We've decided that we attract the best and brightest and no longer want them… It is such a gift, this pipeline of human capital we have had from India into our academic institutions, and we've decided to turn off the tap. It's so short sighted.” – Scott Galloway [64:53]

• Comparing UK and US mistakes:

  • "Even when you make a mistake and everyone agrees that it was a mistake, somehow populations and societies later down the line figure out a way to just not learn the lessons." – Ed Elson [70:51]

Key Timestamps

• What is the doom loop? [10:28–12:20]
• Globalization’s changing perception & Davos insights [12:20–16:25]
• US economy: strengths and vulnerabilities [19:33–21:25]
• Debt, deficits & below-the-surface threats [21:25–24:15]
• Income vs. wealth inequality [24:15–26:46]
• Revolution as corrective mechanism [26:46–28:45]
• AI’s effect on jobs and the economy [35:37–41:13]
• Healthcare, entitlements, and fiscal policy [41:13–46:29]
• Tax reform & fiscal policy proposals [46:29–48:29]
• Housing crisis & social impact [49:35–53:30]
• Higher education: crisis and criticism [53:30–58:48]
• International talent and America’s shifting reputation [58:48–61:04]
• Policy recommendations and institutions [61:46–63:59]
• End discussion: American short-sightedness & parallels to Brexit [64:53–71:32]

Tone & Structure

• The episode blends Professor Prasad’s deeply informed, measured analysis with Galloway’s irreverent, sharp-edged style and Ed’s global perspective.
• The conversation moves fluidly from the theoretical (global political economy) to the practical (housing, education), balancing dire warnings with calls for pragmatic reform and civic engagement.

Final Reflections

The episode paints a sobering picture: the global economy and American society are caught in a destabilizing feedback loop, driven by the unfinished business of globalization, rising inequality, and the rapid, uneven impact of technology. Policymakers must look beyond quick fixes or tribal politics, focusing on restoring the health of core institutions and the social safety net. As Eswar Prasad concludes, it isn't the lack of ideas that's the problem—it's the collective will, and the herculean institutional rebuilding required, to reverse the doom loop.