Can AI and Climate Action Spark a Super-Cycle? Goldman Sachs Thinks So

Global investment bank Goldman Sachs has predicted the advent of a new super-cycle in the global economy. Analysts believe that artificial intelligence (AI) and decarbonization could positively influence this trend.

Peter Oppenheimer, the head of macro research in Europe at Goldman Sachs, said in an interview with CNBC’s Squawk Box Europe on the 8th (local time), “The world economy is moving into a new so-called super-cycle, with AI and decarbonization being driving factors.”

A super-cycle is typically defined as a long-term economic expansion accompanied by an increase in gross domestic product (GDP), inflation, and employment.

Past Super-Cycles and Their Characteristics

Referring to his book Any Happy Returns, Oppenheimer said that the most recent super-cycle of the global economy began in the early 1980s. The period saw interest rates and inflation peaking, followed by decades of declining capital costs, inflation, and interest rates. During this time, policymakers also implemented economic policies like deregulation and privatization. He argued that geopolitical risks decreased during this time, and globalization accelerated.

In contrast, Oppenheimer stressed the unsustainable nature of this trend, pointing out the improbability of interest rates continuing their steep decline over the next decade. He also mentioned the growing resistance to globalization and the escalating geopolitical tensions, emphasizing the complexity of the economic landscape.

AI and Decarbonization as Drivers of the New Super-Cycle

Indeed, tensions are continuing between the U.S. and China over trade relations following the Russia-Ukraine war. In the Middle East, the military conflict between Israel and Hamas is heightening geopolitical tensions.

Oppenheimer predicted that artificial intelligence and decarbonization would positively impact the global economy. Although AI is still in its early stages, he expected its range of applications to expand based on new products and services.

Interestingly, Oppenheimer analyzed that AI and decarbonization have historical parallels despite being relatively new concepts. He believes that while inflation and interest rate increases may have been more severe problems in the early 1970s and 1980s than they are now, many aspects, such as escalating geopolitical tensions, tax hikes, and increased regulation, are similar.

Oppenheimer advised, “Looking back in time, cycles and structural breaks do repeat themselves but never in exactly the same way,” adding, “We need to sort of learn from history what are the inferences that we can look at in order to position best for the sort of environment we’re moving into..”

By. Dung Yong Jung