The outlook of the global economy has evidently shifted from uncertainty towards vulnerability, which is making the front-page news; and was hotly debated at the Davos meeting of political and business leaders. The annual World Economic Forum, in Davos, Switzerland, aims to explore the vulnerability of the global economy in 2008 from the perspective of both developed and developing nations. Will the US economy continue going downhill? If so, to what extent will it affect the global economy? In so far as the influence of the US economy on the world goes, one expression says it best: If the US sneezes, the global economy will catch cold.
This could also help explain a rare show of cooperation between President George W. Bush and the Democratic-led Congress, during the US election-year, in hopes of countering the blow from a sub-prime crisis, credit crunch and surge in oil prices.
The White House and the House of Representatives on Thursday reached a deal that will provide a $150 billion package of tax rebates and business incentives to ward off a recession that would otherwise damage the world's largest economy.
On Tuesday, the US Federal Reserve phased in legislation to cut key interest rates by three-quarters of a percentage point to spur the economy.
Current commentary; however, holds that the stimulating package and additional legislation, even though a temporary push for the economy, merely attempt to postpone the recession.
It is clear that a giant vehicle as the US economy, once on the wrong track, will be not easy to re-direct. The 20th century receded from US history with a burst of financial bubbles brought about by the Information Revolution developing fully in the last decade of the century. The new century has witnessed the up-surge of the trade deficit; meanwhile, the uneven distribution of social wealth has amassed into a few rich hands, and slowed the income growth rate for the general public.
Under such circumstances, the harsh blow delivered by the battered housing market and rocketing oil prices could be the last straw that breaks the US economy.
Nevertheless, some optimists believe the US economy will not suffer recession because the decline is temporary; and the US economy continues on the right track. As an example, the US Secretary of State, Condoleezza Rice, defended, at the Davos meeting, that the US economy is mature, and the structure is rational: the US economy will soon be back on a sound track.
On the contrary, many others observe that the US economy is irreversibly on the decline, which will consequently afflict the global economy. The global financial system does not efficiently supervise loopholes which could bring about a new financial market shock; send the US dollar spiraling; and impact the US's as well as the global economy.
Confronted with the vulnerability of this year's global economy, people are forced to take a step back: what if oil and commodity prices keep rising? What if the dramatic network of the global economy burst the bubbles in emerging markets? And what if the economic center of gravity continues to shift eastward?
Presently, some nations are mistaken by the true nature of the ongoing crisis, seeking trade protectionism and trying to shift their own troubles onto others. The misleading practice could, if permitted, throw the global economy into traumatizing chaos in which every economy moans.
Source: Xinhua
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