Are we in an economic 'doom loop'?

Summary

Podcast Summary: The Indicator from Planet Money

Episode: Are we in an economic 'doom loop'?

Date: February 9, 2026
Hosts: Darian Woods & Adrienne Ma
Guest: Eswar Prasad, Professor of Economics and Trade Policy at Cornell University

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Overview

This episode examines the concept of an economic “doom loop”—a negative feedback cycle fueled by economic conditions, politics, and global institutions. The hosts discuss with Eswar Prasad why factors that were supposed to foster stability and prosperity—globalization, international institutions, and technology—are now driving greater disorder and instability. Prasad also shares thoughts on what it will take to escape such a cycle.

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Key Discussion Points & Insights

1. Introduction: The Economic Mood

• [00:11] Adrienne Ma opens the episode noting the “bad” feeling about the global economy, referencing prevalent news about financial panics, trade wars, and industry collapses.
• [00:27] Darian Woods jokes about their own coverage being slightly cheerier, referencing their earlier sentiment analysis.

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2. Eswar Prasad and the "Doom Loop"

• [00:39] Introduction of Eswar Prasad, an initially optimistic economist whose book turned more pessimistic after research.
• [01:00] Eswar Prasad:

  “One could argue, and I was going to argue, that we're just in a transitional period where there is a lot of volatility, but everything is going to settle down.”

• [01:17] Eswar Prasad:

  “My heart was pulling me in one direction, which was the optimistic thesis, and my head was pulling me in the completely different direction.”

• Prasad’s new book, Doom: Why the World Economic Order is Spiraling into Disorder, is highlighted.
• [01:47] Adrienne Ma: outlines the theme: forces meant for good are driving instability and what it might take to break the cycle.

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3. Explaining the "Doom Loop"

• [03:00] Darian Woods: Defines the doom loop as a cycle where “economic conditions, domestic politics, and international geopolitics feed off each other in a negative way.”
• Three focus areas:
  • Globalization
  • Institutions
  • Technology

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4. Globalization’s Dark Side

• [03:33] Darian Woods: Describes globalization’s positives—cheaper goods, reduced poverty—but emphasizes uneven benefit distribution.
• [03:45] Eswar Prasad:

  “These benefits were not very evenly distributed…there was a sense that the economic and political elite were walking away with many of the benefits of globalization and they were able to capture the political system.”

• This dissatisfaction fuels “politics of resentment.”
• [04:21] Eswar Prasad:

  “…politicians who claim to be populist…are able to say that the problems that people are facing are because of the other,” referencing figures like Bolsonaro, Orban, Trump.

• [04:44] Eswar Prasad:

  “This politics of resentment in the hands of skillful politicians can be a very powerful force. It doesn't necessarily end up making common people better off, but it gives people the sense that they have to blow up the system in order for any change.”

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5. Erosion of International Institutions

• [05:08] Darian Woods: Discusses institutions like the UN, World Bank, IMF.
• [05:23] Eswar Prasad:

  “…the United States, because of the doom loop dynamics, is beginning to walk away from some of these institutions…At the same time, the emerging market countries like China and India feel … the World Bank are really only protecting the interests of the richer countries…So…many of these emerging market countries, led by China, have started setting up their own institutions.”

• [06:11] Adrienne Ma: Jokes, “China was like, we don’t like your little club’s rules, so we’re gonna start our own club.”
• New parallel institutions: Asian Infrastructure Investment Bank, New Development Bank.
• [06:24] Eswar Prasad:

  “Now rather than having a common set of rules that everybody can agree upon, we have fragmentation. And that is the recipe for instability rather than stability.”

• [06:43] Eswar Prasad:

  “Trade used to be seen not just as a bridge between countries…Persistent instability is going to mean much more strife within countries, but also between countries.”

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6. Technology: Promise and Peril

• [07:08] Eswar Prasad:

  “…technology was going to be the answer to everything. …I’m a technology optimist…But technology has a dark side.”

• Focus on AI, digital currencies, and social media:
  • Digital currencies (e.g., stablecoins) may destabilize small country currencies.
    • [07:37] Eswar Prasad:

      “…currencies [of small countries] could basically vanish because of this direct competition."

  • AI could exacerbate wealth inequality.
    • [07:59] Eswar Prasad:

      “We are seeing that AI is leading to…some very wealthy people getting much wealthier. And it’s not clear how broadly these benefits are going to be shared…”

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7. Is There a Way Out?

• [08:22] Adrienne Ma: Asks about solutions.
• [08:29] Eswar Prasad:

  “There is a way out. …It’s going to take a combination of all of us as citizens…recognizing that a better future requires one of shared prosperity among all of us…leaders at all levels…who can help us see beyond our short term interests and prejudices. And we need better institutions.”

• [09:06] Adrienne Ma: Notes that “it does sound like a very tall order…do you really believe that all that can happen?”
• [09:12] Eswar Prasad:

  “That is my fervent hope for us and also the future generations to come. We really need to work to change this reality. But man, it’s going to be a hard slog to get back to a better world.”

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Notable Quotes & Memorable Moments

• “One could argue…we're just in a transitional period where there is a lot of volatility, but everything is going to settle down.” – Eswar Prasad [01:00]
• “…my heart was pulling me in one direction…the optimistic thesis, and my head was pulling me in the completely different direction.” – Eswar Prasad [01:17]
• “…created a class of disaffected people within countries…a sense that the economic and political elite were walking away with many of the benefits of globalization…” – Eswar Prasad [03:45]
• “This politics of resentment in the hands of skillful politicians can be a very powerful force. It doesn't necessarily end up making common people better off, but it gives people the sense that they have to blow up the system in order for any change.” – Eswar Prasad [04:44]
• “Rather than having a common set of rules that everybody can agree upon, we have fragmentation. And that is the recipe for instability rather than stability.” – Eswar Prasad [06:24]
• “Technology has a dark side.” – Eswar Prasad [07:08]
• “We need better institutions.” – Eswar Prasad [08:29]
• “We really need to work to change this reality. But man, it’s going to be a hard slog to get back to a better world.” – Eswar Prasad [09:12]

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Important Timestamps

• 00:11 – Global economic mood and media pessimism
• 01:00 – Eswar Prasad’s initial optimism and process writing his book
• 03:00 – Defining the "doom loop"
• 03:33 – Globalization’s downsides and the politics of resentment
• 05:08 – Fragmentation of international institutions
• 07:08 – Technology’s dual impact: progress and peril
• 08:29 – Search for hope and prescription for a way out

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Tone & Takeaways

The conversation maintains the signature friendly, occasionally playful tone of The Indicator even as the subject matter turns sobering. Eswar Prasad’s analysis is clear-eyed but not entirely devoid of hope; he emphasizes both the magnitude and urgency of the challenge, and the need for collective, institutional, and leadership change to escape the doom loop.

This episode offers a succinct, accessible primer into how interlinked economic, political, and technological trends drive instability—and what it might take to restore global order.

Transcript

[Announcer]

Npr.

[Adrienne Ma]

When you look at the global economy today, it's easy to get the impression that things are bad.

[Darian Woods]

After all, when you turn on the news and it seems like all you hear about is countries dealing with financial panics, trade wars, soaring inflation, countries collapsing industries.

[Adrienne Ma]

Yeah. Is that our fault?

[Darian Woods]

Well, remember, we did our sentiment analysis. We're slightly cheerier than the average financial news source.

[Adrienne Ma]

Okay, so, you know, maybe like half guilty as charged.

[Sponsor/Advertisement Voice]

Yeah.

[Adrienne Ma]

Eswar Prasad is a little different, though. He's an optimist by nature and he's also professor of economics and trade policy at Cornell University. When he sat down to write his most recent book about the global economy, he wanted to focus on the positive. Sure, he thought, the world seems like it's in turmoil right now, but when you zoom out, there's a more optimistic story to tell.

[Eswar Prasad]

One could argue, and I was going to argue, that we're just in a transitional period where there is a lot of volatility, but everything is going to settle down.

[Darian Woods]

But the more research he did, the more convinced he was that the future for our global economy actually is quite bleak and actually a lot bleaker than he originally thought.

[Eswar Prasad]

You know, my heart was pulling me in one direction, which was the optimistic thesis, and my head was pulling me in the completely different direction.

[Adrienne Ma]

So Eswar wrote a very different book than he planned out this month. It is called the Doom why the World Economic Order is Spiraling into Disorder.

[Darian Woods]

Okay, so maybe our, like, slightly chipper delivery might want to have some more somber tones. This is the indicator from Planet Money. I'm Darian Woods.

[Adrienne Ma]

And I'm Adrienne Ma. Today on the show, Ishwar argues how forces meant to make the global economy more stable and prosperous for have actually been doing the opposite. And he'll talk about what it will take to get out of a doom loop.

[Sponsor/Advertisement Voice]

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[Darian Woods]

Edu so what is a doom loop? According to Ishwar Prasad, it's a cycle where economic conditions, domestic politics, and international geopolitics feed off each other in a negative way.

[Adrienne Ma]

And in his book, Eswar provides a number of examples of the doom loop at work. Today we're going to focus on just three of globalization, institutions, and technology. All of these things were supposed to make the global economy more harmonious and stable, but Eswar argues they're actually doing the opposite.

[Darian Woods]

Let's start with globalization. This trend that's been playing out in the last few decades towards more interconnected economies. It's led to cheaper goods and decreased poverty in a lot of developing countries.

[Eswar Prasad]

And there are, in fact, huge benefits. But the problem is that these benefits were not very evenly distributed. So this created a class of disaffected people within countries. And there was a sense that the economic and political elite were walking away with many of the benefits of globalization and they were able to capture the political system.

[Adrienne Ma]

Eswar says this economic discontent created by globalization has created an opening for what he calls the politics of resentment. He says you can see it in politicians like Jair Bolsonaro of Brazil, Viktor Orban in Hungary, or Donald Trump in.

[Eswar Prasad]

The U.S. you know, politicians who claim to be populist, who claim to have the interests of the common man or woman at heart, essentially are able to say that the problems that people are facing are because of the other, and.

[Adrienne Ma]

That other could be elites or immigrants or entire other countries like Mexico, China or Venezuela.

[Eswar Prasad]

And this politics of resentment in the hands of skillful politicians can be a very powerful force. It doesn't necessarily end up making common people better off, but it gives people the sense that they have to blow up the system in order for any change.

[Adrienne Ma]

And that gives leaders political room to, you know, demonize minorities or start beefs with other countries, which you've probably seen in the news lately.

[Darian Woods]

A second example of doom loop dynamics involves institutions. International organizations like the United nations, the World bank, the International Monetary Fund. These were originally created to foster economic cooperation between countries.

[Eswar Prasad]

They did underpin global stability and prosperity for a long time. But what has happened right now is that the United States, because of the doom loop dynamics, is beginning to walk away from some of these institutions, especially the United nations, because it feels that these institutions that don't serve U.S. interests narrowly defined that much anymore. At the same time, the emerging market countries like China and India feel that institutions like The International Monetary Fund and the World bank are really only protecting the interests of the richer countries rather than their interests. So what has happened is that many of these emerging market countries, led by China, have started setting up their own institutions. Examples are the Asian Infrastructure Investment bank or, or the New Development bank, which has been set up by the major emerging market economies.

[Adrienne Ma]

So basically, China was like, we don't like your little club's rules, so we're gonna start our own club.

[Darian Woods]

And it's not just emerging economies. President Trump has created his own global institution, the so called Board of Peace.

[Eswar Prasad]

So now rather than having a common set of rules that everybody can agree upon, we have fragmentation. And that is the recipe for instability rather than stability.

[Adrienne Ma]

Is the implication here that instability economically makes conflict between countries more likely?

[Eswar Prasad]

That's correct. You know, trade used to be seen not just as a bridge between countries, but essentially as one that would keep cooperation between countries on an even keel. Persistent instability is going to mean much more strife within countries, but also between countries.

[Darian Woods]

So we've covered how the forces of globalization and institutions play into the doom loop. Let's do one more example. Technology.

[Eswar Prasad]

So in the cheerful version of the book, technology was going to be the answer to everything. And you know, I'm a technology optimist. I think many of the technologies around us are creating wonderful elements of economic progress, creating ways to improve our lives in many ways. And in the book, I focus in particular on AI, on digital currencies, and on social media. All of these can bring us together. But technology has a dark side.

[Adrienne Ma]

So he says, take digital currencies, for example.

[Eswar Prasad]

There are these cryptocurrencies called stablecoins, which have stable value because they are backed up by the US dollar. They're going to be much more trusted than the currencies of some small countries that don't have credible central banks or credible currencies. So those currencies could basically vanish because of this direct competition.

[Darian Woods]

Or he says, look at the rise of AI.

[Eswar Prasad]

We are seeing that AI is leading to, you know, some very wealthy people getting much wealthier. And it's not clear how broadly these benefits are going to be shared. So I worry again that for all its promise and for all that technology is giving us in terms of overall progress under the surface, it is going to create even more tensions that intensify the doom loop.

[Adrienne Ma]

So this is a pretty dire prognosis. Is there a way out of the doom loop?

[Eswar Prasad]

There is a way out. And I do point to this in the last chapter of my book because after all, I did want to give my readers some light at the end of it all. What it's going to take is a combination of all of us as citizens. You know, seeing ourselves not just as citizens of our countries, but of our communities and the world at large and recognizing that a better future requires one of shared prosperity among all of us. Second, it's going to take leaders at all levels, community, business, national leaders who can help us see beyond our short term interests and prejudices. And we need better institutions.

[Adrienne Ma]

It does sound like a very tall order. Do you really believe that all that can happen?

[Eswar Prasad]

That is my fervent hope for us and also the future generations to come. We really need to work to change this reality. But man, it's going to be a hard slog to get back to a better world.

[Darian Woods]

Hey, Darian woods here. Very excited to possibly see you in person in New York April 6th. Come see me and Mary Childs and Amanda Aronczyk from Planet Money. We're going to perform a live never heard before Planet Money show. We'll also hear from Emily Oster, who is an economist most famous for letting mothers to be know that they can drink coffee. This is all part of Planet Money's book tour. You'll get a tour tote bag with your tickets while supplies last. And we're also going to a dozen cities. Each stop is a little different with different hosts. I'll also be in Toronto. Find out more with links to get [e-mail] this episode was produced by Corey.

[Adrienne Ma]

Bridges and engineered by Robert Rodriguez. It was fact checked by Sierra Juarez Cake and Cannon is our editor and the indicators of production of NPR.

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