The IMF World Economic Outlook notes that the desired process of rebalancing global demand from countries with large trade deficits (notably the U.S.) to countries with large trade surpluses (notably China) is not going very well.
Relatedly, it points out just how difficult it is for increased demand in developing economies to offset stagnant or falling demand in the much slower growing advanced economies.
At pages 29-30, the report notes that the advanced economies -- North America, most of Europe, Japan -- now count for about 50 per cent of global demand, measured in GDP at purchasing power parity. However, if one looks at consumption measured at current exchange rates in terms of U.S. dollars -- which they argue is the relevant metric for looking at needed trade re-balancing -- the advanced economies still account for about 70 per cent of global demand.
Following this line of thought, it is estimated that consumption in China would have had to have increased by 17 per cent in 2009 to offset the impact on world demand of the fall in U.S. consumption compared to pre-recession levels.
In short, part of the reason that the global economy is slowing so alarmingly is that the positive impact of emerging country growth on global demand is not sufficient to offset the impact of consumption stagnation in the advanced economies.
Put even more succinctly, if growth cannot be revived in the U.S., Europe and Japan, the world is in deep doo doo.
This article was first posted on The Progressive Economics Forum.
Thank you for reading this story…
More people are reading rabble.ca than ever and unlike many news organizations, we have never put up a paywall – at rabble we’ve always believed in making our reporting and analysis free to all, while striving to make it sustainable as well. Media isn’t free to produce. rabble’s total budget is likely less than what big corporate media spend on photocopying (we kid you not!) and we do not have any major foundation, sponsor or angel investor. Our main supporters are people and organizations -- like you. This is why we need your help. You are what keep us sustainable.
rabble.ca has staked its existence on you. We live or die on community support -- your support! We get hundreds of thousands of visitors and we believe in them. We believe in you. We believe people will put in what they can for the greater good. We call that sustainable.
So what is the easy answer for us? Depend on a community of visitors who care passionately about media that amplifies the voices of people struggling for change and justice. It really is that simple. When the people who visit rabble care enough to contribute a bit then it works for everyone.
And so we’re asking you if you could make a donation, right now, to help us carry forward on our mission. Make a donation today.