Just Growing Pains

LONDON: Is the world economy on the brink of another recession like the sudden slump of 1990, which threw 20 million workers out of their jobs even in western Europe, pushed commodity prices to their lowest level since the 1940s, shattered stock markets and currencies the world over and unseated apparently invincible politicians like Margaret Thatcher and George Bush?

Since the early spring the American and European economies have both weakened abruptly. The increase in American interest rates in 1994 turned out to have a much bigger impact on production and employment there than most economists expected. Meanwhile, the unhealthy strength of the Japanese yen and the Deutschemark has done even more damage to the industries of Japan, Germany, France and the other core countries of western Europe. The flight of foreign capital from Mexico has hit the whole of Latin America, and for several countries there, such as Argentina, Venezuela and Brazil, the worst is probably still to come. Even the "tiger" economies of east Asia have suffered from sharp falls in weakening demand for exports to America, western Europe and Japan. As this process continues, the world will echo with warnings about recession.

These warnings may produce setbacks in world stock markets. They will set off further falls in commodity prices. And they will cause sleepless nights for producers of raw materials and businesses involved in world trade. But in the end, the nightmare of a world economic slump will turn out to be just that - a bad dream, which floats away with the morning mist.

By the start of next year, the American and European economies will again be growing quite strongly. The prospects of a long period of steady expansion of consumption, investment and trade will be looking more favorable than they have done at any time in the last three decades.