The world is on the cusp of a transformative economic era that could redefine how we understand growth and productivity. This is the bold assertion of Peter Oppenheimer, the head of macro research in Europe at Goldman Sachs. In a recent interview with CNBC’s “Squawk Box Europe,” Oppenheimer elucidated the concept of a new “super cycle,” a phenomenon that marks extended periods of economic expansion. This new cycle, he argues, is distinct from those of the past, driven primarily by the revolutionary forces of artificial intelligence (AI) and decarbonization.
Super Cycle: A New Economic Dawn
Super cycles are extensive phases of economic growth marked by increased GDP, robust demand for goods, higher prices, and elevated employment levels. Oppenheimer points to the last significant super cycle that began in the early 1980s, characterized by declining interest rates and inflation, along with policies favouring deregulation and privatization. This period also saw reduced geopolitical risks and a surge in globalization. However, Oppenheimer notes that only some of these factors will continue in the same vein. He predicts a shift in trends such as interest rates not declining as sharply, a pushback against globalization, and heightened geopolitical tensions exemplified by the Russia-Ukraine war and U.S.-China trade disputes.
Artificial Intelligence and Decarbonization: Catalysts of Change
Despite these challenges, Oppenheimer highlights two potent forces that could shape this new cycle positively: AI and decarbonization. AI, still in its infancy, is expected to revolutionize product and service bases, potentially boosting stock markets and impacting the economy significantly. The integration of AI is anticipated to enhance productivity, which could positively affect growth and profit margins. Similarly, the shift towards decarbonization, although a relatively new concept, holds the potential for significant economic restructuring and innovation.
Historical Parallels and Future Lessons
Drawing historical parallels, Oppenheimer compares current shifts to the late 19th century, a period marked by rapid technological innovation and a push toward modernization and industrialization. While history never repeats, understanding past cycles and structural breaks can provide valuable insights for navigating the upcoming economic environment.
As the world gears up to enter this new super cycle, the lessons from history combined with the unprecedented advancements in AI and the global move towards decarbonization suggest a significant economic transformation. This era, while echoing elements of the past, stands unique in its potential to fundamentally reshape the global economy.
