The Year the Earth Fell from the Sky

On December 9, the World Bank presented its most dour global economic forecast since 1982. Noting that there were no clear countervailing driving forces that would reverse this trend, this august body predicted that capital flow into the developing world, the poorest nations, would fall by 50% in 2009. That means that dire poverty becomes hopeless, abject poverty for many of this planet’s inhabitants.

About 1.1 billion human beings on planet earth currently subsist on $1 a day or less, more than double that number on less than $2 a day. Hard to fathom how this is possible, and unimaginable that these circumstances could get much worse. It can; a lot! This is truly a global recession, already depression in some nations by any economic description, which threatens to linger at or near a bottom we have not yet reached for some intolerably long period of time (possibly years). For those at the edge of existence, (The ones who won’t be able to provide adequate food and shelter from their own labor or agricultural efforts) this downturn may in fact signal massive widespread death and disease.

Global economic growth, pegged at 0.9% by the Bank (others think even this number is too optimistic), does not keep up with the population growth and hence represents an actual aggregate contraction. With a general deflationary trend on raw commodities, the money that will be earned by those at the bottom of the spectrum will decline just as job loss in emerging economies will send an army of people who were once filled with hope back into the world of marginal subsistence. Lower prices for basics will only help the few with enough money to buy them.

Strong negative indicators show even developed countries with serious economic issues that will have a major negative impact on the local standard of living, much worse than what we face here in the United States. In the Western world, Ireland, Italy and Greece (where there has been rioting, sparked by a shooting, but continued over a failed economy) are high on the list of countries at risk.

We think we’ve got it bad when, as Madlen Read and Martin Crutsinger of the Associated Press put it, “Investors are so nervous they're willing to accept the same return from government debt that they'd get from burying money in a coffee can — zero… The Treasury Department said Tuesday it had sold $30 billion in four-week bills at an interest rate of zero percent, the first time that's happened since the government began issuing the notes in 2001.” That’s certainly bad news, but if you have money you can invest – anywhere – you’re still better off than most folks on earth.

The World Bank’s economists found the post-World War II recessions inappropriate comparisons to this current crisis, finding that only the Great Depression had sufficient parallels. Even people who want to spend and grow, who can sustain the required costs, are forced to hold back because of the global dearth of credit.

In the end, dire prospects mandate difficult and powerful decisions. As the greatest economic power on earth – at least for now – what the United States does to reinvigorate its own economy and how it supports poorer nations in coping with theirs will determine how quickly we reach the place from which we can fall no more (the sacred “bottom” that allows the world at least to take a breath) and how long we have to stay there until some semblance of growth can resume. I most certainly do not envy the tasks that will grip the President-Elect, his administration and our Congress for the foreseeable future. Trying to find the shortest path toward recovery will still inflict untold pain on most of the population of earth.

I’m Peter Dekom, and maybe, just maybe, we can get through this together.