OPINION

Commentary

The Economist was unequivocal: Welcome to the first global recession of the twenty-first century. The Times agreed: Fears of recession are rising, one of the newspaper’s recent headlines offered. Views across the Atlantic are no different: The country is on the verge of recession said The New York Times recently. Economic figures seem to confirm these views. World industrial production, on an annual basis, has fallen by 6 percent in the first six months of 2001. It is estimated that the world’s GDP during the second half of the year will remain flat. GDP in Japan, the world’s second-biggest economy, has plunged by 5 percent, while Japanese exports in the first six months of this year have nosedived by 28 percent. Asian imports and exports have dropped by more than 20 percent. And the US has suffered a 32 percent decline in the purchase of electronic goods. The essence of this recession, however, cannot be determined merely through economic indicators. Rather, it lies with the fact that for the first time in nearly 70 years, we are faced with a crisis of excessive accumulation. Second, for the first time since the Great Depression in the early 1930s, recession seems to be hitting all economic centers (Japan, US, Europe, East Asia, Latin America) at the same time. Due to the greater level of interdependence between the world’s economies – itself a product of the globalization process – economic shocks reverberate much faster. Third, this is the first time that recession has been so closely connected to the financial losses, in the world’s stock markets, by a broad strata of population. The average 28 percent slide in the value of shares internationally has meant the evaporation of some $10 trillion from the world’s accounting assets, and has caused a massive redistribution of wealth, mainly at the expense of small investors. All these factors make it difficult to overcome the current malaise. And as Europe gradually enters a period of recession – with prospects for 2002 already looking dim – our country is bound to be affected, despite the government’s claims to the contrary.