The Party is Over

Many argue that a US recession will no longer affect the world because China has supplanted America as an engine of the global economy. But, while China is growing fast, it accounts for only 5% of world GDP, while the US contributes 28%.

MUNICH – With the United States teetering into recession, the global economic boom has ended. The boom was unusually long and persistent, with four years of roughly 5% growth – a period of sustained economic dynamism not seen since around 1970.

The clearest sign that the boom is ending is the IMF’s forecast of 1.5% growth for the US in 2008. That may not sound like a recession, but the Fund’s marginally positive projection primarily reflects the growth overhang from 2007, with hardly any new contribution in 2008. It is compatible with three consecutive quarters of zero growth in 2008.

Many argue that a US recession will no longer affect the world because China has supplanted America as an engine of the global economy. Wrong. Although China is growing fast, its economic power remains tiny. While the US contributes 28% to world GDP, China accounts for only 5%. The whole of Asia, from Turkey to China, contributes 24%, less than the US alone.

To continue reading, please log in or enter your email address.

To continue reading, please log in or register now. After entering your email, you'll have access to two free articles every month. For unlimited access to Project Syndicate, subscribe now.

required

By proceeding, you are agreeing to our Terms and Conditions.

Log in

http://prosyn.org/REqROfB;

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated cookie policy and privacy policy.