CAMBRIDGE – If stock market and interest-rate spreads are to be believed, America’s economy has seen the worst and may be on its way to a slow recovery. But the troubles for the world economy are just starting. If globalization does not get the fix it needs, economic prospects will be dim for rich and poor countries alike.
The worst that could happen is a return to the 1930’s, when countries put up high trade barriers and retreated into isolationism, to the detriment of all. Fortunately, this is a remote scenario today. But the next worst thing is to assume that a minor patch-up will be enough to render globalization healthy and sustainable. It will take real effort and creativity to repair the deep cracks in globalization revealed by the financial crisis.