Sluggish growth prompts new world economy fears
Economists are muttering that the global economy is growing too slowly to pull us all out of the recession. It could be a long, painful crawl back up to prosperity, with bitter political divisions on show.
President Obama has appealed for politicians to unite around a plan to tackle the stagnant US economy and an unemployment rate of more than 9%, calling on his Republican opponents to put ‘country before party.’
Across the globe, governments and economists are saying that the road to full recovery after the recession that followed 2008’s banking crisis is turning out to be much steeper and rockier than they anticipated.
In Europe, hopes have faded that measures to bail out crisis-stricken countries like Greece and Italy will stop the international investment markets punishing the entire Eurozone.
The financial markets are said to be ‘jittery’ – up one moment and down the next, but mostly down. One analyst said this week that the international economic indicators for both manufacturing and service industries were ‘a bloodbath’. In August, for example, the US created no new jobs. Meanwhile, an important survey in the UK of the expected demand for services, which dominate the economy, showed the biggest fall for a decade.
It’s gloom-inducing stuff. And a huge challenge for the politicians: elections tend to be won or lost on how much the voters trust their leaders and would-be leaders to sort out the economy. But because of its global nature, much of this mess is beyond their control. Hence this week’s moves by Barack Obama to try and present a positive action plan for creating more jobs – one of his ideas is to give the go-ahead to ‘infrastructure’ building projects.
In the UK there are people even in the governing Conservative party, which is wedded to a programme of tough spending cuts, who would like to see similar initiatives to boost growth. His Labour opponents constantly urge Tory Chancellor George Osborne to abandon his austerity drive and draw up a ‘Plan B’. But now some parliamentarians and commentators who originally backed his policy are advising Mr Osborne to allow more investment to boost growth, in a sort of Plan A Plus: for example, building projects like the expansion of the broadband network across the UK.
Kill or Cure?
Any hope of patriotic feelings prompting political unity is probably as vain in Europe as in the USA. Disagreements about the causes and nature of the current economic disease are too strong and too fervently argued for any consensus to be reached.
Some diagnose a passing, if painful, illness. Many others now believe there’s a danger of the world economy developing a chronic condition: low growth, high unemployment and a rising cost of living. There is even one school of thought that argues Western capitalism itself, the system, is in crisis.
- Obama is appealing to his opponents' patriotic feelings. Is this just a rhetorical trick to cast them as the villains? Or should leaders bury their differences during difficult times?
- Is it better for political leaders to 'talk up' the economy to avoid increasing anxiety and, for example, making employers cautious about taking people on or investors cautious about lending money? Or should they always acknowledge a bad situation?
- Do an analysis of the problems facing either the US, UK or Eurozone economies. Write it up as an article for a newspaper or make a presentation to the class.
- President Obama is admired as an orator. Draft a short, five-minute speech designed to give hope to an audience demoralised by the state of the economy and lack of jobs. Deliver it yourself or be a 'director' and coach a friend to deliver it effectively.
Some People Say...
“People with money and power will always be able to exploit any system.”
What do you think?
Q & A
- What does it mean if capitalism is 'broken'?
- The capitalist system, some argue, worked fine during the 19th and 20th Centuries but is outdated in today's information age, as international money flows get faster and more complicated.
- What's the problem with it?
- These days, intricate financial deals can create a huge amount of 'virtual' wealth, which is underpinned with no real value. Banks, for example, can owe much more cash than they own. When debts get called in, banks can't pay, and have to be rescued by governments.
- Causing a crisis?
- Exactly. Some economists worry that unless we change the system fundamentally, we're doomed to repeat the same crisis all over again.
- The economic area comprised by the 17 countries of the European Union that have adopted the Euro as their currency.
- The basic physical structures and organisations that allow a society or country to function – transport networks is one example, or utilities like the power supply, water, and in the modern era, technology
- Karl Marx
- The economic historian and thinker who, along with Friedrich Engels, invented Communism. Born in Germany in 1818, he moved to London, where he lived, worked and died in 1883.