World Bank on the financial crisis

WORLD NEWS: “World Bank Doubles Its Aid,” by Tom Barkley, Wall Street Journal, 12 November 2008.

Tons of good stuff in a small article.

Assistance to developing countries will be plussed up by more than $100 billion over next few years.

Darkened forecast: global growth this year down from 2.7% to 2.6%, with most experts saying the world needs to grow 3% to avoid falling back, so this year will constitute the first great global recession of the modern globalization age (not in technical terms, but in real terms). 2009 is cut from just-getting-by 3% to 1%.

Hidden in that global average is the prediction that emerging markets grow 6.5% this year and 4.5% next.

Key point, as Zoellick says, is “virtually no country has escaped.” Such is the reality of this globalization of our making.

Scariest prediction: financial flows into developing countries will drop from about $1T this year to $530B next year. This is the real threat to globalization’s overall health and advance.

But again, after a quarter-century bull run we were eventually going to have to experience this moment, so the question isn’t, Will markets/globalization survive? but What new rules emerge from this opportunity?

Comments

[farhad]

There are two economic crisses,one) a periodic cycle (between 7-10 years)or a more major recession,which is fundementally overproduction(supply)compared to the power of consumption(demand);a bubble burst,deflation occurs,reinvestment & recovery, which up to 20th century was resolved by "invisible hand"(A.smith),orby the internal mechanisim of the system.By 20th century,these mechanisims no longer solved the problems,hence,two new tools todeal with these crisses;1)monopoly:which controls competitions,hence,controling the prices,reducing the production instead of reducing the prices.2) Government interffrence & involement as a lastresort & stablishing a credit system for the people to be able to keep up with this unbalanced supply & demand situation,which we can see is maxed out & we can see the recent bubble burst.The second crisses is the structural crisses:accumulations of theseinternal contraditions in the system,over decades,constitiute a stageof ultimate limits where in economic aspect,the normal tools to confront the crisses,like;historical inventions,expoleration of new terrotries,war(Globle/limited),credit system,...ect,are not able to respond,that is what we are wittnessing today.Political aspect;AdamSmith's invisible hands,Kant's idealistic view of a perfect world,like aU.N . Hegel's solution in Government & national states,all have cometo a dead end.Envirnmental aspect;row materials,water,air,oil,...ect,are not unlimited,and is another indication of ultimate limits.the question is where is the light beyond all these darknesses.

[Louis Heberlein]

Ah Yes! Time for The End Is Near stories. But it would be hard to get substantive needed and effective transformations if everybody was busy singing "Happy Talk" type songs.

[Kirkins Pock]

i know you are talking about small countries here but I was having an interesting conversation last night about future threats to us in this economic context and thought about your book. Do you see any of the "core" states being vulnerable to instability and extremist demagoguery once they can't deliver the recent growth. It just seemed to me in the conversation, that the stability of the core over the next few years is taken for granted by the public at large. Looking at the philosophical swings taken by some stable world leaders (countries) in the past eight years, is it realistic to believe that the some more recent "core" countries, even those with huge investments in the global economy, and "stable" to totalitarian regimes, are not going to experience dangerous political swings that may result in a complete rejection of globalization? Most of the big regime changes that eventually became our problems were completely unforeseen.

[Tom Barnett]

Life in Core countries is relatively nice, whatever the growth, compared to life throughout most of the Gap.

But as the Great Depression showed, it's crucial to have a centering, middle-class ideology to buttress social stability during hard times.

[Kirkins Pock]

Thanks Tom for the response. Love your blog.