World Bank Foresees Global Contraction in 2009
The World Bank is now projecting that worldwide GDP will shrink in 2009, the first time that’s happened since World War II.
When thinking about economic distress, it’s important to try to distinguish between levels and rates of change. By all accounts, the economy in China is going to be healthier than the economy in the United States. Which is to say that China will have a higher rate of growth. But China is still a dramatically poorer country than the United States. And it’s going to be in poor countries like China where a downturn is truly painful. Those are also the places where you’re most likely to see economic crisis turn into really serious political crisis. And of course bad as the Great Depression was, the downturn itself wasn’t nearly as terrible as its political consequences—the rise of Nazism and the outbreak of World War II.
23 Responses to “World Bank Foresees Global Contraction in 2009”
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March 8th, 2009 at 6:28 pm
Greenspan was an utter, catastrophic failure, it seems. Unless he saw it coming and acquiesced.
March 8th, 2009 at 6:41 pm
I know blogs are supposed to be great b/c they aren’t edited, but you really should strike the word ‘truly’ and replace with something like ‘even more’.
Plenty of people in the developing world are experiencing ‘true’ pain as a result of the current predicament.
March 8th, 2009 at 6:42 pm
Speaking of editing, that should have been, ‘developed’.
Oh well.
March 8th, 2009 at 6:50 pm
Somehow Matt has convinced himself that Great Depression (something) (something) WW II. This is, to put it mildly, an oversimplified view.
In fact, it ignores mind-boggling amounts of history that will never happen again. In all probability, the French will not again contest with Germany the leadership of Europe. Henry Ford isn’t around to distribute The Protocols of the Elders of Zion but even if he were, few Germans are seeking a dictator to replace Kaiser Wilhelm and we complain now, not of German inflation, but of their distressing devotion to balanced budgets and no inflation.
The list could go on (and on) but it should be plain to see that future troubles will come from other causes. For example, our ‘Drug War’ has destabilized nation after nation, and we now have troops in Colombia and Afghanistan while northern Mexico has become almost ungovernable. The great hope for world peace in the ‘Drug War’ arena lies in the increasing willingness of other nations to kick us out.
In national intelligence estimations, energy and the changes attending global warming have been mentioned as potential causes of future troubles. All of which is to say, ixnay on the orld ar-2 way. Even as a form of vague handwaving about possible bad outcomes, it doesn’t work.
March 8th, 2009 at 7:11 pm
Re Matthew’s comment “And of course bad as the Great Depression was, the downturn itself wasn’t nearly as terrible as its political consequences—the rise of Nazism and the outbreak of World War II.”
————
Yeah –but the thing to remember is that the Germans didn’t see it that way at the time. Remember “Triumph of the Will” and “Strength Through Joy”?
Extra credit: Anyone know what the Nazis put in their chocolate — and why chocolate became a romantic gift?
March 8th, 2009 at 7:15 pm
See http://en.wikipedia.org/wiki/Meth_Amphetamine#World_War_II
That’s what this economy needs:
Blitzkreig!
March 8th, 2009 at 7:23 pm
“And it’s going to be in poor countries like China where a downturn is truly painful.”
Umm, no. When you have nothing, you have nothing to lose. In the end, freedom really is just another word for nothing left to lose. I was in Chennai, India a year ago. They got hit hard by the Tsunami. But it was the hotels that suffered. The poor people did fine. Granted, they lost everything they had, but they really didn’t have anything to begin with. They live in shacks made of scraps of corrugated sheet metal. The Tsunami took those shacks out, and deposited random scraps of corrugated sheet metal in their place. From which they built identical houses. They were back to their normal lives in no time. The hotels can’t say the same.
March 8th, 2009 at 7:43 pm
Except, of course, for the ones who died, or suffered in private ways that were not immediately apparent to an outside observer. But other than that, they were basically fine.
March 8th, 2009 at 7:49 pm
“Except, of course, for the ones who died”
Well, yeah. But they live really brutal lives where people die all the time. I’ll make it clear that I do not think people should live this way. But we should all acknowledge that people do in fact live these lives. And when you live a life like that, nothing can harm you. It’s already as bad as it gets.
March 8th, 2009 at 7:58 pm
This may be the single best example of dark humor I’ve seen in years. Years.
March 8th, 2009 at 7:59 pm
I’m not sure what you mean saying that the downturn in China will be really painful. In an immediate economic sense it’s harder to go from poor to poorer than it is to go from upper-middle class to middle class, especially when the richer country has a stronger safety net, as the U.S. does compared to China.
But your reference to Nazi Germany suggests not just economic pain but political upheaval, and in that case the risk in China is not a poor society having a serious downturn, but a rapidly growing, developing economy having a serious downturn. In periods of rapid economic growth, urbanization and industrialization (e.g. Germany, early 20th century) a lot of the social order is thrown into the blender. Even when it happens in a context of generally rising prosperity it produces unrest. China has a high-capacity authoritarian state and yet it has had hundreds of riots (usually small-scale) every year in the midst of amazing economic growth.
In very poor, stagnant countries like Afghanistan and Zimbabwe, the poor are largely in the agricultural economy. They’re going to suffer in an economic downturn, but it probably won’t cause political upheaval because the means of the people to rise up in a political revolt are already low, and get even lower in tough economic times.
March 8th, 2009 at 8:09 pm
“This may be the single best example of dark humor I’ve seen in years”
Maybe so, but it really isn’t very funny. It’s the source of nightmares for me.
March 8th, 2009 at 8:12 pm
@Don Williams:
Hey, ho, Let’s go.
March 8th, 2009 at 8:23 pm
I’m not sure I completely agree that China is a much poorer country than the United States. Of course that statement is true enough. But the more American families lose their homes, the more we should wonder about how prosperous a country America really is. Where is it easier for a day laborer to find work, Los Angeles or Beijing? How many foreclosed homes are in Detroit, compared with Shanghai? In America, the economic crisis is literally “hitting people where they live.” Or used to live.
March 8th, 2009 at 8:36 pm
You have posted a couple of times on how this may cause political instability in China. But what about the already unstable places like Pakistan?
March 8th, 2009 at 8:46 pm
Shiva America is plenty prosperous compared to China. Even during this dowwnturn I am thinking of buying a car. And the thing is that Cincinnati’s transportation system is such that we are assuming that most people are going to buy a car. Needless to say that most people in China would never dream of being so furtunate. GDP per capita in China is $2660 GDP per captia in the US is $47,025. Think about it our GDP could never grow again and China’s could grow 10% a year and it would still take China more than 30 years to catch up to us.
March 8th, 2009 at 9:26 pm
It is certainly true that having a “healthier” economy doesn’t say much about the quality of life in a given country. Japan’s economy has been in terrible shape for over a decade (with a slight recovery before this latest crisis), but Japan is still a pretty nice place to live.
March 9th, 2009 at 2:42 am
It’s the some 200-300 million people in China that are part of newly created tenuous middle class for which a prolonged economic downturn will be disastrous. And the greatest potential source of a political ‘problem’.
Japan has a modest political relief valve by saying no thank you to the LDP. The Chinese have no such thing with the CCP. The core of the CCP’s legitimacy over the last two decades has been not so much the PLA or even Mao hagiography, although both of these help. It’s that everything gets better every year (pollution excepted). To have to fall back on Maoist principles or the PLA or both will be the start of some very dark days.
March 9th, 2009 at 8:47 am
At the height of its growth, China developed a pattern of people moving, not just from the farm to the city, but from city to city, in pursuit of seasonal industrial jobs. They’re already having troubles with this. They’re trying to prevent large accumulations of unemployed men in any one spot.
If they’re not careful, they could have communist revolutionaries on their hands.
March 9th, 2009 at 1:31 pm
If they’re not careful, they could have communist revolutionaries on their hands.
Almost as good as fostert’s line
March 9th, 2009 at 3:34 pm
The correct comparison is with GDP/capita in ppp. So China
is now at $6500, not $2800. It won’t take 30 years for the Chinese to get a high standard of living like the US.
April 9th, 2009 at 1:40 am
Not that I’m impressed a lot, but this is a lot more than I expected for when I found a link on SU telling that the info is quite decent. Thanks.
April 15th, 2009 at 11:12 am
If you want to hear a reader’s feedback
, I rate this post for 4/5. Decent info, but I just have to go to that damn yahoo to find the missed bits. Thank you, anyway!