Cause and Effect
By Ian Munroe • Aug 3rd, 2009I wouldn’t be surprised if measures like industrial production do in fact level off later this year. But that’s not enough, that’s still leaving output failing to grow - it’s almost certainly going to mean unemployment in the major economies continuing to rise.
So we may hit a kind of plateau beyond which we don’t fall very much. But actual recovery, actual return to anything like full employment, full capacity utilization, I think is years away - two, three years if we’re lucky, quite possibly much longer than that.
Is everyone hurting equally? Who’s feeling the brunt of the slowdown?
There are two kinds of losses here. There are the financial losses, which fall more heavily on the wealthy than they do on the rest because they have more financial assets. But even there, substantial losses are also occurring in pension funds, things that affect people around the world. Then there’s the economic disruption, which I’m sorry to say, as always, falls most heavily on the weakest and the poorest.
If we’re looking at Western countries, unemployment is rising most sharply among the least-skilled, the lowest-paid. And if we’re looking worldwide, although the GDP numbers may be falling most in particularly troubled, advanced countries, the sheer human misery is concentrated in the poorest countries.
A lot of people will starve as a result of this crisis. Not many of those people will be in the West. They will be in less-developed parts of the world.
Will the developing world feel those effects later on?
It’s already happening now. If you look at the sharp fall in world trade and the disruption in world trade credit, you can see there are already extremely negative effects happening in parts of Africa. World trade has declined faster than it did during the Great Depression. For many poor countries, trade is literally what they need to survive. Hit with a decline in their ability to export - which is necessary to buy the essentials of life - they’re in terrible trouble.
