Three prominent sources were in accord last week, when they announced that growth has indeed returned to the global economy, albeit at an extremely slow pace. The first of these sources was the IMF, which confirmed its previous forecast last July (World Economic Outlook Update, July 8, 2009) that the economy will shrink this year by 1.4 percent, and then return to a growth rate of 2.5 percent in 2010. The IMF currently holds the belief that “the global economy is beginning to pull out of a recession unprecedented in the post–World War II era, but stabilization is uneven and the recovery is expected to be sluggish”. The Federal Reserve Chairman Ben Bernanke concurred with these remarks, saying that “the global economy appears to be levelling out, and prospects for a return to growth in the near term appear good." He warned, however, that the recovery is "likely to be relatively slow at first," and that “the world still confronts “critical” challenges.” Meanwhile, a European survey expected “a return to slow growth” in the European Union during the third trimester of 2009. On both occasions (July 8 and August 18) however, the IMF did not tackle the issue of how to restore balance to the global economy, but merely pointed out the problem in its WEO update, announcing that “Looking beyond 2010, it remains unclear how structurally weaker private consumption in the United States and other advanced and emerging economies that suffered asset price collapses will be compensated for by stronger demand elsewhere.” In this setting, “activity and credit growth are likely to remain subdued in many [world] economies. The fact of the matter is that analysts are quite preoccupied with the issue of how to restore the above mentioned balance to the world's economies, first in the influential advanced and emerging economies and, subsequently, in the strategic economies, while separating them from each other in a framework of autonomy that may even take the form of “self-sufficiency”. More specifically, many economists are stressing the need to “trim” the excesses currently present in the global economy. This issue revolves around, for example, the need to adjust U.S. private consumption on the one hand, and the need to shift the output of emerging countries from exportation to domestic consumption in their own markets. Meanwhile, the available and recently updated indicators play an important role in defining trends within the global economy. In the United States, for instance, individuals are now saving more, and imports to the U.S have fallen at a pace that is leading the U.S. trade deficit to follow suit. This all comes at the expense of emerging countries which have hitherto owed their large growth rates to their increased volume of exports to America and developed countries. However, another problem emerged within the main problematic issue; this is because while wars have led the citizens of countries such as Germany and Japan to save, they did not spend from their private savings during the crisis, but rather held onto them for fear that the situation may deteriorate to the worse. Consequently, there was a decreased pace of spending. What is currently required therefore is the re-distribution of global wealth, while achieving a balance between the large U.S. deficit and the excess of savings in emerging countries, especially China. Consequently, a better trade balance must be attained, by comparing it to the size of domestic markets; as such, the United States market must not hog the largest stake of worldwide trade when its population is no more than 350 million people, while the markets of China and India represent one third of the world's population. Such an approach would be aimed at improving the local economies of Asian countries in order to promote domestic spending, and to reduce the current emphasis present there on exportation, and in addition to establishing an alternative regional market. In return, the United States, - where the size of the economy amounts to a fifth of the world economy - would increase its exports and reduce its domestic excessive consumption. It should be noted here that the volume of savings in China has amounted to approximately 50 percent of its gross domestic product estimated at 4.3 trillion U.S. dollars - at the 2008 exchange rate -, while savings in America amounted to about 12 percent of its GDP at $ 14.2 trillion dollars. Nevertheless, the recovery of the global economy does not only depend on the two poles mentioned above. Rather, the global economy cannot retain equilibrium without the cooperation of all parties in carefully and sensibly rebuilding a balanced economic structure that includes for the world's different regions. As such, competition would not become economic warfare, but rather would be an entity sheltered under a purposeful globalization that redistributes wealth within the global village. While the release of savings requires constant fine-tuning of spending aspects, it is also not wise to count on these savings to achieve growth. This is because the positive indicators of some economies, which are showing that the latter have gone out of recession, were attained through investments by the public sector. This also happened amid a deadlock in global private investment, and amid a very cautious re-launching of crediting and lending. Most of the spending focused therefore on government stimulus packages came from public debt which burdened national budgets. This means that the private sector has to keep pace with public spending and must capitalize on the latter's results to regain its role, and to repay the Governments what they were forced to pay to bail out failing institutions, or what they had to invest in the infrastructure to enhance the citizens' spending power. This latter would then ultimately prompt the citizens to consume the productivity of the private sector. Meanwhile, new trends in consumption structures are expected to emerge in the upcoming year, whether in the United States, China, India, and Japan in particular, where radical economic change is expected following the legislative elections this month.
