The Great Moderation (1992-2020) was the period of low inflation and stable economic growth the global economy experienced over the previous two to three decades — taking the United States as an example, both inflation and GDP remained stable within a 0-0.5% year-to-year fluctuation band. Its persistence rested on two structural pillars: globalized labor supply that continuously suppressed consumer-goods costs, and elastic energy supply that kept energy prices low. After 2020, the two pillars disintegrated in succession, and the world entered an era of great volatility in which inflation and economic fluctuations amplified markedly, while a multipolar reconfiguration (regionalization, localization, friend-shoring) replaced the unipolar order.
The Framework As It Stands
This section is organized from the compiled research working draft: it preserves the original framework’s structure, terminology, and key formulations, with editorial bridging and external factual annotations; diagrams are drawn by the compiler following the structure of the original text.
I. Definition of the Great Moderation and the Two Pillars
Definition: The Great Moderation (1992-2020) refers to the global economy’s sustained phase of low inflation and stable growth. Taking the United States as an example, from 1992 to 2020 both inflation and GDP remained stable within the 0-0.5% band. Compared with the early 1980s, when inflation once reached a 15% peak before falling back to 2-3% after the Volcker hikes, the Great Moderation was a historically rare window of prolonged dual stability. (The framework emphasizes: this was a once-in-decades era backdrop, and after 2020 the world stands at the historical inflection point transitioning from the peak of the Great Moderation to its end.)
Pillar 1 — Globalized labor supply: The collapse of the Soviet Union and China’s reform and opening released a vast supply of low-cost labor — on top of global capitalism’s original base of 2.5 billion workers, China’s 1.8 billion working-age population (sic) joined the globalized production system, keeping consumer-goods prices under long-term downward pressure.
Pillar 2 — Elastic energy supply: Before 2000, international oil prices ran in the 10-20 USD/barrel range for extended periods; large-scale capacity expansion from 1960 to 2000, driven by the converging interests of many countries, sustained continuous capacity growth and formed the long-term foundation of low energy costs.
flowchart TD A[Great Moderation 1992-2020] --> B[Pillar 1: Globalized labor supply] A --> C[Pillar 2: Elastic energy supply] B --> D[China's 1.8bn working-age population joins globalization] B --> E[Global capitalism's original 2.5bn + Soviet/China release] D --> F[Long-term downward pressure on consumer-goods prices] E --> F C --> G[Pre-2000 oil at 10-20 USD/barrel] C --> H[Large-scale expansion 1960-2000] G --> I[Low energy-cost foundation] H --> I F --> J[Low inflation] I --> J J --> K[GDP stable within 0-0.5% fluctuation band]
II. The Three Dimensions of Peak Globalization: Factor Flows / Development Stage / Uneven Gains
Dimension 1 — Factor flows: The early phase of globalization in which all countries benefited in concert has passed; the world has entered a stage in which regional interests wax and wane at each other’s expense, and anti-globalization sentiment has risen accordingly.
Dimension 2 — Development stage: China’s per-capita GDP grew from 1,000 USD in 2001 to 10,000 USD in 2019; emerging-country labor no longer integrates into the division of labor at the lowest possible cost, but has begun seeking better working conditions and welfare, and building social-security systems.
Dimension 3 — Uneven gains: The beneficiaries of globalization are global capital owners and the emerging-market middle class; the losers are the developed-country middle class (the white middle-income cohort in Europe and the US saw the slowest income growth). (The framework emphasizes: wealth inequality in developed countries has become an ever more serious social phenomenon; under ballot-box politics, populism rises and political frameworks drift toward the far left or far right — this is the political-economic feedback loop at the root of the Great Moderation’s end.)
flowchart LR A[Three dimensions of peak globalization] --> B[Factor flows: countries gain at each other's expense] A --> C[Development stage: China per-capita GDP 1,000 to 10,000 USD] A --> D[Uneven gains: capital + emerging middle class vs. developed-country middle class] D --> E[Stagnant middle incomes among white cohorts in Europe/US] E --> F[Widening wealth inequality] F --> G[Rise of populism] G --> H[Political frameworks drift far left/far right] H --> I[Anti-globalization political forces take power] I --> J[Protectionist policies] J --> K[Globalization dividend exhausted]
III. Three Turning-Point Events → Two Geopolitical Ruptures → Multipolar Reconfiguration
Turning point 1 — Trump takes office: Anti-globalization currents truly rise in mainstream politics; advocacy of trade, technology, and financial restrictions on China, with a gradual withdrawal from the globalization chain (exiting climate accords, drawing down troops in Europe, disengaging from global affairs).
Turning point 2 — The 2020 pandemic: Considerable labor-force losses in both developed and emerging countries, with global supply chains disrupted by logistics and pandemic-control restrictions — a direct blow to Pillar 1, globalized labor.
Turning point 3 — The 2022 Russia-Ukraine war: Pushed deglobalization into a new stage; ideology surged to prominence and energy supply fell out of balance — the two great geopolitical relationships were struck in succession within the four years from 2018 to 2022.
The two geopolitical ruptures: (The framework emphasizes:) US-China relations grow increasingly tense; Russia-Europe relations are torn apart completely.
Three supply-chain directions:
- Regionalization: no longer relying on China alone, but seeking more regional supply-chain options
- Localization: important productive capacity returns to European and American home soil
- Friend-shoring: trading-partner selection carries an ideological tilt
flowchart TD A[Three turning-point events] --> B[Trump takes office] A --> C[2020 pandemic] A --> D[2022 Russia-Ukraine war] B --> E[US-China relations decisively worsen] C --> F[Supply-chain + labor shock] D --> G[Russia-Europe relations torn apart] D --> H[Energy supply imbalance] E --> I[Unipolar to multipolar reconfiguration] G --> I I --> J[Regionalization / localization / friend-shoring]
The complete causal chain: The two pillars sustain low inflation → globalization dividend exhausted + labor costs rising + uneven distribution of gains → populism rises → three turning points → the Great Moderation ends → multipolar reconfiguration of the global order.
Compiler’s Perspective
Coordinates: Category = Monetary Systems and Circulation · axis_h = Dao (worldview) · axis_v = Why It Is So
Grounding layer:
For those whose Great Moderation framework was never updated, the concrete errors occurred in two specific moves:
First, when inflation rose in 2021-2022, they held on to the “transitory inflation” judgment — because in their mental model, Pillar 1, globalized labor supply (China’s 1.8 billion people), remained intact, and Pillar 2, elastic energy supply (the expansion confidence of pre-2000 oil at 10-20 USD/barrel), still existed. But in fact the pandemic had already snapped Pillar 1, and the Russia-Ukraine war completed the final blow to Pillar 2; the structural inflection point of both pillars failing arrived earlier than the moment they were willing to acknowledge.
Second, seeing the data in The China Telescope on Globalization showing that “China remains the world’s largest manufacturing base,” they inferred that the globalization framework was essentially intact. The error here: globalization volume data (share of manufacturing output) and globalization dividend data (low-cost incremental labor) are two different indicators; the former can remain elevated while the latter had already run dry once China’s per-capita GDP rose from 1,000 to 10,000 USD.
Distinctive increment: The two geopolitical ruptures (US-China from 2018, Russia-Europe in 2022) occurring in succession within four years were not the coincidental stacking of independent events, but the time-series output of the causal chain: uneven gains at peak globalization → populist backlash → political turn. Looking at either geopolitical event in isolation leads one to underestimate the strength of the structural judgment that “the multipolar reconfiguration is already irreversible”; only by seeing the two ruptures as two nodes of the same causal system can one make the correct order-of-magnitude judgment about how long the rise in the inflation center of gravity will persist. This is isomorphic with the causal-node logic of debt cycles in No One Escapes the Causal System: Goodness Is the Greatest Direction: the rupture triggers differ, but the irreversibility of a system-level causal chain is the same.
See Also
- The Stagflation Risk Framework
- The Dollar Circulation System
- The China Telescope on Globalization
- The Dual Anchors of Interest Rates and Exchange Rates: A Macro Observation Framework for the Age of High Volatility
Source
Compiled working draft z-0200, catalogued 2026-07