How rare this global contraction is, and yet, still how painful
Tuesday, January 13, 2009 at 1:31AM ARTICLE: "Global Trade Takes a Dive: As U.S. demand shrinks, China and other exporters are hit hard," by Anthony Faiola and Ariana Eunjung Cha, Washington Post National Weekly Edition, 15-21 December 2008.
ARTICLE: "World Bank Expects Pain Worldwide," by Mark Landler, Wall Street Journal, 10 December 2008.
World trade will contract in 2009 by just over 2 percent. It will be only the third time since 1971 that global world trade has contracted. The other times were 1975 and 1982. Both times the contraction lasted only one year.
Still, no question that we face a contraction and pain. The WB says capital flows to developing economies will be cut in half. But even that flow of over $500 billion compares very well to FDI flows of just a few years ago; they've just gotten so huge lately.
WB says 2009 growth will be 0.9 percent, lowest since 1982. Developing countries will grow 4.5 percent, too slow to be counted as anything less than a recession.
Of course, the end of all these simultaneous booms is that energy and food is cheaper--suddenly. That's a stimulus package all its own.
But the big WB fear is that no one can say who will start the global rebound. These are the uncharted waters we enter, because this is the first global recession since the intense connectivity of globalization kicked in.
But look at it this way: it had to happen sometime, because no global boom can last forever.
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