Here’s a nice dose of perspective — While citizens and politicians in many parts of the world demand economic stimulus from their governments, global GDP growth is actually expanding at a decent clip.
Even for developed countries as a group GDP growth is decent and similar to what was experienced in the early part of the decade highlights Credit Suisse.
Through all the speed up and slowdown scares and microscopic inspection of economic data in the last 18 months, the global economy seems to have regained the growth rates it enjoyed in the first half of the decade, before the financial crisis and the recession. We expect global GDP to expand by 4.7% in 2010 and 4.3% in 2011 (Exhibit 2). This compares well enough with 4.6% growth in the five pre-crisis years 2003-07. For reference, October consensus expectations for 2010 and 2011 global GDP growth were 4.6% and 4.1%, respectively. The corresponding IMF forecasts are 4.8% and 4.2%.
The problem is that we’ve just had a huge dislocation of workers in select economies, like the U.S., and we’ve also just become far too used to the booming growth rates we saw just before the crisis:
If, objectively, growth rates have been restored, why is there so much anxiety expressed about the state of the global economy? Part of the answer, we think, lies in the starting point for the resumption of growth.
That’s one of the issues for the global economy: it needs to grow faster than the pre- crisis pace for a period of time in order to regain the levels of prosperity implied by the earlier path. And it shows no sign of wanting to do so on its own; hence, the inclination on the part of so many policymakers, pundits, and politicians to “step on the gas.”
Policy authorities in many of the most important places are acting as though the economy’s mid-2000s [high growth] path was desirable and sustainable and perhaps even optimal. Calculations of output gaps and the like would flow from such judgments. They may be mistaken, but financial and economic performance in the next few years will likely be influenced by their
Thus we act like growth is not good enough due to the effects we feel coming off from the boom we saw before — with the most notable being soaring unemployment.
It’s like getting hammered, then having a hangover, and decrying the hangover while demanding governments cure the hangover by getting you hammered again.
(Via Credit Suisse, All you need is growth, Neal Soss, 15 October 2010)
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