MELISSA BLOCK, host:
Here's the question: Is the world economy moving in the right direction? Well, economists don't agree on the answer. Some say the world economic system is doing great; others say it's poised for big trouble. NPR's Adam Davidson visited one of the leading pessimists to get his take on where the global economy could be headed.
ADAM DAVIDSON reporting:
Some of the scariest views about the world economy come out of a lovely, bright space with big windows and high ceilings in New York City. Nouriel Roubini gives the tour.
Professor NOURIEL ROUBINI (New York University): We're here in our office. It's a white box down in the West Village with a view on the river, the Hudson River. And here are all the folks who are working with us: the technical people, the publishers, editors and the entire crew.
DAVIDSON: Roubini is an economics professor at New York University. He has a staff here 24 hours a day working on his Global Economics Monitor, a Web site of international economic news and analysis. On one wall there's a large National Geographic map of the world. Roubini says you can easily track the many economic disasters that could happen.
Prof. ROUBINI: OK. So if you look at the map, certainly China is a very large and important country. The problem with China today is that, paradoxically, they're growing too fast.
DAVIDSON: The world economy is growing, and many regions are doing quite well. But Roubini says that in several seemingly healthy countries, there are real dangers lurking out of sight. The Philippines is so indebted, it could collapse; so could Jamaica, Lebanon, Hungary and Ecuador.
Prof. ROUBINI: And even some of the success stories, like Brazil or Turkey, that received very large IMF support and they made major reforms are still kind of borderline fragile.
DAVIDSON: In the past decade there were major financial crises in Mexico, Asia, Russia and Argentina. Tens of millions became impoverished. Governments fell. Many of those crisis countries have since rebounded and are doing well. But, Roubini says, the pain could have been avoided. That's a lesson Roubini hopes the US learns. American citizens and the government are borrowing far too much money from the rest of the world.
Prof. ROUBINI: So you could have a situation in which this kind of combination of weaknesses and imbalances might lead to something like a perfect storm. And that could unravel in a situation in which you could have very significant economic slowdown in the US economy. That's a danger we're facing.
DAVIDSON: The US economy is too wealthy, vibrant and well-respected to collapse like Argentina's did, but a recession could be quite painful. To avoid one, Roubini says, the entire world economy needs to be rebalanced. The US has to stop spending so much more money than it makes. China needs to revalue its currency. Europe and Japan need serious structural reforms, so they can start growing more quickly. The global system could become healthy again, but Roubini sees no evidence that leaders of any of the key countries are taking this reform seriously. Is Roubini the only economist who holds such a gloomy view?
Mr. ADAM POSEN (Senior Economist, Institute for International Economics): No. I'd say 80 percent of the mainstream macroeconomists come out roughly where Nouriel does.
DAVIDSON: Adam Posen is a senior economist at the Institute for International Economics. Roubini's views may be mainstream, but it's his reach that is unique. Roubini has advised dozens of world leaders. He was a close economic adviser to President Clinton. He consults regularly with international banks and other businesses. But it's that Web site that has established Roubini as the primary source for information about the world economy. Adam Posen.
Mr. POSEN: Roubini's blog is definitely by far the best serious economics Web site in the country. I mean, it's great.
DAVIDSON: Roubini does have one bit of optimism to share. He thinks a major economic crisis is unlikely to happen this year, but he's a lot more worried about 2006. Adam Davidson, NPR News, New York.
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