Quote:
IMF: World economy to shrink for first time in 60 years in 'Great Recession'
• IMF expects global growth to turn negative this year
• In January, IMF predicted 0.5% growth
• Earlier forecast was for 2.2% expansion
* Graeme Wearden
* guardian.co.uk, Tuesday 10 March 2009 10.10 GMT
The global economy will shrink this year for the first time since the second world war as the "Great Recession" ravages businesses, consumers and financial institutions around the world, the International Monetary Fund warned today.
Speaking in Tanzania, IMF managing director Dominique Strauss-Kahn said the economic downturn would be more severe than previously thought.
"The IMF expects global growth to slow below zero this year, the worst performance in most of our lifetimes," Strauss-Kahn told African political and financial leaders in Dar Es Salaam.
"Continued de-leveraging by world financial institutions, combined with a collapse in consumer and business confidence, is depressing domestic demand across the globe, while world trade is falling at an alarming rate and commodity prices have tumbled."
Strauss-Kahn dubbed the downturn the "Great Recession". The world economy has not suffered an annual contraction since 1945. There appears to be broad consensus that the economic downturn will be much deeper and more protracted than most experts thought just a few months ago.
In January, the IMF predicted that the world economy would grow by 0.5%, which was already a sharp revision of its earlier prediction of 2.2% growth. That was based on 3.3% expansion in developing countries and 2% contraction in advanced economies.
The IMF is expected to announce fresh official projections later this month.
Strauss-Kahn's warning, made at a conference to examine the impact of the world financial crisis on Africa, comes just two days after the World Bank predicted that the world economy would shrink by at least 1% this year.
The World Bank also forecast on Sunday that world trade would suffer the biggest decline in 80 years, and said that by this summer industrial output could be 15% lower than in 2008.
And veteran investor Warren Buffett warned yesterday that the world faced "an economic Pearl Harbor".
Most major economies are now officially in recession. The UK economy shrank by 1.6% in the last three months of 2008, following a 0.7% contraction between July and September, and is expected to keep shrinking through 2009. Japan's economy is shrinking at its fastest rate for 35 years, with GDP falling by 3.3% in the fourth quarter of 2008. And in America GDP declined by 3.3% in the last quarter on an annualised basis.
Darling: 'Moral imperative' to help poorer neighbours
The downturn has already sent unemployment rising sharply on both sides of the Atlantic, with analysts fearing that the UK jobless total will exceed 3 million before the crisis is finished. There are concerns, though, that developing nations will be hit even harder. Writing in the Guardian today, Alistair Darling says that Europe's leaders have a "moral imperative" to step in to help poorer nations.
"The International Monetary Fund has identified 26 countries, half in sub-Saharan Africa, that are particularly vulnerable to the crisis. Central and eastern European economies are estimated to face a financing gap of $100bn in 2009. And the World Bank estimates that 129 developing countries are facing a financing shortfall of between $270 and $700bn," writes the chancellor.
"Many decades of economic union have brought greater prosperity, but closer economic integration also brings challenges. We are all affected by what happens to our neighbours," he adds.
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this is a new assessment of the general outline of the economic situation by those fine neoliberals at the imf.
it is interesting to monitor what this organization is saying, even as it's history demonstrates a wholesale defunctionalization--by this i mean that the imf is now lurching back toward the role that it was set up to play, but which it has not played since the end of the bretton woods period in the early 1970s.
since then, it has been a rigid instrument of neoliberal ideology applied as a weapon of neocolonial domination of the southern hemisphere by way of the instruments of debt.
so there's a grain of salt to be added to this.
nonetheless, the lurching pathway it charts is interesting.
to wit:
IMF Survey: IMF Urges G-20 States To Take More Decisive Action to Combat Crisis
the basic argument here is obvious---the economic situation escapes the control of any particular nation-state; it cannot be addressed by way of the institutional infrastructure that was constructed out of bretton woods because the system has shifted around these institutions and their basic functions have changed---so the option is concerted, co-ordinated action at the level of the G-20.
the problem--well, one of them---is a lack of institutional infrastructure capable of carrying out co-ordinated actions decided upon transnationally.
the questions are probably obvious:
how much at variance is the imf diagnosis with what you understand to be happening?
what do you make of the picture the imf draws of the economic crisis as a whole--that it is effectively a massive economic contraction the likes of which have not been seen since world war 2.
what this means, really, is that the current situation has outstripped all the institutional checks that were put into place in the middle 1940s to prevent structural wobble-to-collapse.
this should be a concern.
don't you think?
what kinds of action do you think this assessment would require.
keep in mind that actions on the part of states is a function of assessments of the situation being addressed--and that as assessments change, the rationale for actions will change along with it.
in other areas, the imf is trying to call for swift implementation of stimulus packages and a wholesale cleaning out of transnational financial sectors.
at the same time, the imf itself remains institutionally neoliberal. so there is a problem of institutional ideology that cuts across what they are recommending. it's hard to say exactly what this entails--it's more a deep and obvious Problem....