L’Homme est instinctivement protectionniste et seule la raison le pousse au libre-échange.
(Celso Amorim, Brazilian foreign minister, in today’s Le Monde.)
Category: World Economy
In Saturday’s Ardfheis speech, the Taoiseach announced:
I will create a new central banking commission. This will incorporate both the responsibilities of the Central Bank and the supervision and regulatory functions of the Financial Regulator. This will build on best international practice similar to the Canadian model. And it will provide a seamless powerful organization with independent responsibility. It will have new powers for ensuring the financial health, stability and supervision of the banking and financial sector.
I interpreted this statement as implying that Canada has something called “a central banking commission” which incorporates both central banking and financial supervision. It turns out, however, that Canada does not have such a structure.
On an annual basis, the volume of world trade fell by 25-30% between 1929 and 1932. If you use quarterly data, you can push the peak to trough Great Depression trade decline up to around 35%.
The latest data indicate that the volume of world trade fell by 13% between August and December 2008. We are not only on track, we are ahead of schedule. Everything now depends on the policy response.
One of the alarming features of the current crisis is that way in which the short run protectionist pressures it is giving rise to are being superimposed upon longer run pressures that having been undermining support for globalization for some time — in particular, the feeling that it is harming poorer workers in richer countries. Equally alarming is the fact that all this is happening at the start of a century which will be marked by a shifting geopolitical equilibrium — which is always risky — and by renewed concerns about resource scarcity — which is riskier yet.
An essay just published by Bruegel tries to provide some historical context for all of this. Anyone interested in learning more can read this book.
Much of the recent comment on this blog has understandably focused on the specifically Irish angles in saving the banks and getting credit flowing again, getting on top of the government deficit and improving competitiveness. But any progress towards these goals in a purely Irish context will be set at naught if the global economy continues to head south. We thus have a vital interest in the success of the various stimulus packages intended to reverse, or at least reduce, the slide into global recession.
The IMF’s most recent World Economic Outlook update (published January 28th last) presented its third downward revision of its economic forecasts in just four months. It now projects global growth of just ½ per cent in 2009, with advanced economies expected to suffer their deepest recession since World War II. Collectively, advanced economies are expected to contract by 2 per cent in 2009 – the first annual contraction in the post-war period.