Economist Nouriel Roubini, nicknamed "Dr. Doom" for his gloomy predictions in the run-up to the financial meltdown four years ago, says the fallout from that crisis could last the rest of this decade.
Roubini, widely acknowledged to have predicted the crash of 2008, sees tough times ahead for the global economy and is warning that without major policy changes things can still get much worse.
Until Europe radically reforms itself and the U.S. gets serious about its own debt mountain, he said, the world economy will continue to stumble along to the detriment of large chunks of the world's population who will continue to see their living standards under pressure, even if they have a job.
Roubini, a professor of economics and international business at New York University, spoke in an interview this week with The Associated Press at a dinner on the sidelines of the World Economic Forum, where he is one of the hotly pursued stars.
Looking at economic prospects this year, he agreed with the International Monetary Fund's latest forecast that the global economy is weakening and said he might be "even slightly more bearish" on its prediction of 3.3 percent growth in 2012.
He painted a grim picture of the eurozone in recession and key emerging markets in China, India, Brazil and South Africa slowing down, partly related to weakness in the eurozone. He predicted that the U.S. economy, the world's largest, will grow by just 1.7-1.8 percent this year, with unemployment remaining high. The government, he added, was "kicking the can down the road" and not taking measures to increase productivity and competitiveness.
"We live in a world where there is still a huge amount of economic and financial fragility," he said. "There is a huge amount of uncertainty _ macro, financial, fiscal, sovereign, banking, regulatory, taxation _ and there is also geopolitical and political and policy uncertainty."
"There are lots of sources of uncertainty from the eurozone, from the Middle East, from the fact that the U.S. is not tackling its own fiscal problem, from the fact that Chinese growth is unbalanced and unsustainable, relying too much on exports and fixed investments and high savings, and not enough on consumption. So it's a very delicate global economy," Roubini said.
He said the biggest uncertainty is the possibility of a conflict with Iran over its nuclear program that involves Israel, the United States, or both. That could lead oil prices now hovering around $100 a barrel to spike to $150 per barrel, he said, and lead to a global recession.
Unemployment and economic insecurity have become big issues from the Mideast to the Occupy Wall Street movement in the U.S., and protests from Israel and India to Chile and Russia _ and at the same time there is rising inequality between rich and poor.
"All these things lead to political and social instability," he said. "So we have to reduce inequality. We have to give growth to jobs, skills, education, and increase human capital so workers can compete."
Roubini called for a major change in policy priorities.
"We have to shift our investment from things that are less productive like the financial sector and housing and real estate to things that are more productive like our people, our human capital, our structure, our technology, our innovation," he said.
Roubini said slow growth in advanced economies will likely lead to "a U-shaped recovery rather than a typical V," and it may last for another three to five years because of high debt.
"Once you have too much debt in the public and private sector, the painful process could last up to a decade, where economic growth remains weak and anemic and sub-par until we have cleaned up the balance sheet and invested in the things that make us more productive for the future," he said.