Nothing is permanent except Change

Today, ‘World Economy’ is the matter that repeatedly strikes the head of even every common person of the world. Originated from USA in second half of 2008, economic slow down and its impacts have inevitably engulfed almost the entire world on account of fast globalization of world economy that has taken place in last few decades. Slow down has gradually turned into a rare economic crisis which is compared with the Great Depression of 1929 in USA. Situation is differently described as either Credit crunch, Economic slowdown, Recession or Depression by different school of thoughts. Whatever it may be, reality is undeniably very painful. Imagining sudden collapse of Global Economy was something ‘never thought of’ just a few months back. However, this is the very reality of today. Ironically, the worst affected nation is USA, which led the growth process of world economy after World War II in a stupendous way. According to the World Bank, the current economic crisis, born in the United States with sub prime defaults has grown into the first global recession since World War II. According to the World Economic Forum, not less than forty percent of the entire world's wealth has been destroyed in the recent financial collapse. In the U.S. alone, between housing and the stock market, more than $18 trillion in wealth has been estimated to have already been destroyed. Big Private Banks that largely control the financial systems of the western world are bankrupt. So, western world's economies cannot be expected to have urgent recovery as they are heavily dependent on bank-system credit to operate. As reports reveal, more than 10,000 homes go into foreclosure and more than 20,000 people lose their job every day in USA. And the collapse is accelerating, developing its own self-reinforcing dynamic. Job losses further aggravate foreclosures, reducing demand, leading to more job losses and further downfall of the financial system. None of the stopgaps designed to stanch the bleeding have yet worked. There seemed no bottom in sight. Economists apply number of theories and principles, as also indulge into relentless analysis of the crisis, its real causes and magnitude. But, a fact of the matter is, all judgments are after all the conclusions drawn on the basis of specific understanding of the discipline which a scholar belongs. However, diagnosis is not an end, but a beginning of practice. If disease is known, it is half cured. Even during Great Depression of 1930, all measures taken to combat the situation were a part of trial and error exercise. That time, recovery had come along the set of fresh circumstances and major events like World War II, which excited economic growth in a post-war period, leading the USA to become the superpower and the entire world getting economically sound, as it is today. One thing is sure; the cause of current recession is the greed of those who failed to anticipate the consequence of their actions. What started as a small matter of sub-prime loan defaulters has now become a subject of global discussion and has engulfed the global economy scenario. On a more ideological front, it is high time to have a rethink on the very idea of free markets and capitalisms

Federal Reserve economist Lawrence Kotlikoff has suggested that the U.S. government is "actuarially bankrupt." Renowned Investor Warren Buffett stated that the U.S. economy has "fallen off a cliff" virtually facing an "economic Pearl Harbor," experiencing a "close to the worst-case" outlook of falling business activity and rising unemployment. Despite declarations like bailout packages of billions, decrease in interest rates, reserve requirements and bank-lending rates to correct the global economy, the conditions seem too stubborn to improve. Yet, the coordinated efforts of world leaders on the forums like G-20 reassure that things have taken a proper route. Of late, some signs of recovery have been seen, but, no one knows, it is natural or the one germinated by unusually large dosages of financial packages. Uncertainty is truly a pervasive feature in economics.

In the light of above, it would be pertinent to take a look to and step-by-step comprehend every minor point attributable to world economy, pros and cons of recession and recovery measures and so on, a large number of relevant subjects.

At the outset, it is essential to understand that the process of globalization that has made the world a Global Village. It has brought the entire world under one umbrella which has been recently sabotaged by economic upheavals developed in USA. Increased communication through internet and interdependence of the world's markets and businesses has made this process intensively faster. People around the globe are more connected to each other than ever before. Information and money flow more quickly than ever. Goods and services produced in one part of the world are increasingly available in all parts of the world. International travel is more frequent. This phenomenon has been titled “Globalization”. Globalization in its literal sense is the process of transformation of local or regional phenomena into global ones. It can be described as a process by which the people of the world are unified into a single society and function together.
"The Era of Globalization" is the frequently used preferred term for describing the political, economic, and cultural system of today. There are inherent advantages and disadvantages of any system. Some of the advantages of Globalization are as under:

• Increased free trade between nations
• Increased liquidity of capital allowing investors in developed nations to invest in developing nations
• Corporations have greater flexibility to operate across borders
• Global mass media ties the world together
• Increased flow of communications allows vital information to be shared between individuals and corporations around the world.
• Greater ease and speed of transportation for goods and people
• Reduction of cultural barriers increases the global village effect
• Greater interdependence of nation-states
• Reduction of likelihood of war between developed nations
• Increases in environmental protection in developed nations

On the other hand, there some disadvantages of globalization. In addition to some negative effects which may not be relevant for discussion here, there is always an increased likelihood in the globalized economy that economic disruptions in one nation affects all associated nations and their financial as well as banking systems.

It can now be well judged about how the current US recession has been transformed into a big, severe global recession and become the cause of concern to all and sundry across the globe. The effect of the slowdown on exports, finance and investment is earthshaking. Low income countries have been and are getting hit very had. The flow of private capital to the emerging markets has dried up. Export-led Growth Modules of developing nations seem to be the rolling stones gathering no moss. With this background, it would be easier to study the current face of recession.

To be continued…………………