Economy Dominates G-20 Summit
RENEE MONTAGNE, host:
To find out about the state of the global economy that confronts G-20 leaders we turn to David Wessel - he's economics editor of the Wall Street Journal.
Mr. DAVID WESSEL (Economics editor, Wall Street Journal): Good morning.
MONTAGNE: So, David, what is the view from London?
Mr. WESSEL: Well, the world economy does not look very good from London, or from anywhere else right now. This week we saw two international organizations, the World Bank and the Organization for Economic Cooperation and Development, say that this year, 2009, will be the first one in which the entire global economy contracts since World War II.
In the past we had recessions that were bad in some places but that was offset by growth other where? Not this time. And the world economy is in the middle of a very deep and simultaneous recession right now.
MONTAGNE: Now, we just heard in Tom Gjelten's piece that emerging and developing markets could provide much of the world's growth in the coming years as rich countries contract. So the recession at this point in time, it's still worse for the rich countries, the ones with big housing and lending booms?
Mr. WESSEL: Yes, that's right. In the U.S. we're now in the 17th month of the recession. That's the longest we've had since World War II. This is the first time since 1979 the economists tell us that the economy of every one of the 50 states is contracting at the same time. But it's not limited to the rich countries.
The World Bank report this week said that 53 million more people will be forced into poverty as a result of this. A lot of the successful developing countries were depending on exporting to the consumers of Europe and the U.S. and Japan, and if we're buying less, they're going to sell less, whether it's iron ore, oil, or manufactured goods.
MONTAGNE: What about all the government stimulus and interest rates cuts both here in the U.S. and also abroad?
Mr. WESSEL: That's a good question. I think people are frustrated that they've seen all this action on the part of the Fed and the other central banks and the Congress and the parliament, and they say if we've gotten all this stimulative medicine, why aren't we feeling better? I think there are probably three answers to that question. One is, just wait. As we know, the U.S. stimulus, for instance, which is very big, has only begun to flow into the pipeline.
The second is, it would be worse if they hadn't done all this stuff. I mean, imagine if the Federal Reserve had been sitting on the sidelines like they did in the 1920s. We would be in that kind of situation again, possibly, if they hadn't done all this.
And the third is the problem is turning out to be an awful lot bigger and deeper than even some of the pessimists thought just six or nine months ago, so the stimulus may not be enough to get us out of this thing. It will just make it a little less worse.
MONTAGNE: Well, and of course, David, people all over the world are really wanting to hear some bright spots in the global economy. Got any to report?
Mr. WESSEL: Yeah. I think that we can - I think the situation is not good, but it's not like there's nothing to take heart from. We know that, for instance, in Asia, growth will be much slower, but the economies are still growing. China's expected to grow at six percent this year. Apparently Vietnam is going to grow - although slower than it did before - much faster than its neighbors.
And there are even a few crocuses in the lawn here in the United States. The stock market had a good month in March and there are some signs of thawing in the credit markets, and some economists, who don't have a very good track record this time around, think that the U.S. economy will bottom out, it will stop shrinking, maybe at the middle of this year. Although I don't think anybody expects a very robust recovery this year.
MONTAGNE: And just to end this conversation, back to the G-20 Summit, with all those world leaders - what, do you expect it to have a real impact?
Mr. WESSEL: I don't think the meetings per se ever have nearly the impact that we in the press sometimes make them, but they do become focuses of attention that get bureaucrats and politicians to get things done that were moving kind of slowly. So of course if they all come out and hold hands, that may give us a boost to confidence and that would be welcome now.
I think on the substance it will interesting to see if they can get any more action out of the Europeans on fiscal stimulus. The Europeans are pretty stubborn. But I think there will be some practical results. One of the reason world trade is so - has contracted so much more than the world economy is that there's a shortage of trade finance, the money, the credit that exporters and importers make - need - to make their trade work, and they're going to come up with a program to substitute from that.
MONTAGNE: Right. Yeah.
Mr. WESSEL: And they're probably going to expand the powers of the IMF to help developing countries.
MONTAGNE: David, thanks very much.
Mr. WESSEL: A pleasure.
MONTAGNE: David Wessel is economics editor of the Wall Street Journal.
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