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After a warning by the World Bank that the global economy would shrink this year for the first time since World War II, the IMF has now followed suit by dubbing the downturn the "Great Recession" - while several commentators are already starting to use the word 'depression'.

IMF: World economy to shrink for first time in 60 years in 'Great Recession' - The Guardian (UK)

The Economic Crisis and the Developing World - Time

"Swimming Against the Tide: How Developing Countries are Coping with the Global Crisis" - World Bank report

The future of human beings is what matters - Luiz Inácio Lula da Silva

10th March 09 ~ STWR

IMF: World economy to shrink for first time in 60 years in 'Great Recession'

10th March 09 - Graeme Wearden, The Guardian (UK)

The global economy will shrink this year for the first time since the second world war as the "Great Recession" ravages businesses, consumers and financial institutions around the world, the International Monetary Fund warned today.

Speaking in Tanzania, IMF managing director Dominique Strauss-Kahn said the economic downturn would be more severe than previously thought.

"The IMF expects global growth to slow below zero this year, the worst performance in most of our lifetimes," Strauss-Kahn told African political and financial leaders in Dar Es Salaam.

"Continued de-leveraging by world financial institutions, combined with a collapse in consumer and business confidence, is depressing domestic demand across the globe, while world trade is falling at an alarming rate and commodity prices have tumbled."

Strauss-Kahn dubbed the downturn the "Great Recession". The world economy has not suffered an annual contraction since 1945. There appears to be broad consensus that the economic downturn will be much deeper and more protracted than most experts thought just a few months ago.

In January, the IMF predicted that the world economy would grow by 0.5%, which was already a sharp revision of its earlier prediction of 2.2% growth. That was based on 3.3% expansion in developing countries and 2% contraction in advanced economies.

The IMF is expected to announce fresh official projections later this month.

Strauss-Kahn's warning, made at a conference to examine the impact of the financial crisis on Africa, comes just two days after the World Bank predicted that the global economy would shrink by at least 1% this year.

The World Bank also forecast on Sunday that trade would suffer the biggest decline in 80 years, and said that by this summer industrial output could be 15% lower than in 2008.

And veteran investor Warren Buffett warned yesterday that the world faced "an economic Pearl Harbor".

Most major economies are now officially in recession. The UK economy shrank by 1.6% in the last three months of 2008, following a 0.7% contraction between July and September, and is expected to keep shrinking through 2009. Japan's economy is shrinking at its fastest rate for 35 years, with GDP falling by 3.3% in the fourth quarter of 2008. And in America GDP declined by 3.3% in the last quarter on an annualised basis.

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The Economic Crisis and the Developing World

10th March 09 - Dan Fletcher, Time

The Gist:

The World Bank said it first: in 2009, the global economy will contract for the first time since World War II. That's the banner headline of the international financial group's March 9 report, but, particularly for developing countries, the devil runs rampant through the details. (Really, when a report is titled "Swimming Against the Tide," you know there's not much good news forthcoming.) The World Bank paints a downright dismal picture of the growth prospects for developing countries, which are just now beginning to feel the full repercussions of the credit crisis that started in the United States. The World Bank expects number of people living below the poverty line to increase by 46 million worldwide, just as credit for developing countries becomes harder to secure, global trade withers, and remittance payments — the money sent home by workers overseas — plummets. Developing countries are more protected from downturns in production, but they're the most exposed to a prolonged global slowdown. The World Bank makes clear that in this recession, there's nowhere to hide. (See pictures of the global food crisis.)

Lowlight Reel:

On the global economic outlook: "Global industrial production declined by 20 percent in the fourth quarter of 2008 ... Global GDP will decline this year for the first time since World War II, with growth at least 5 percentage points below potential."

On the impact on global trade: "Falling demand in advanced economies has had serious implications for global trade, with 2009 expected to experience the first yearly decline in world trade volumes since 1982, the largest decline in 80 years."

On the effects of declining commodity prices on the developing world: "Many LICs [low-income countries] rely disproportionately on revenue from commodity exports, the prices of which have declined sharply along with global demand ... During the second half of 2008, non-energy commodity prices plunged 38 percent, with most indices ending the year well below where they started."

On the effects of a global economic slowdown on developing countries: "The slowdown in growth will likely deepen the degree of deprivation of the existing poor. In many LICs, large numbers of people are clustered just above the poverty line and are therefore particularly vulnerable to economic volatility and temporary slowdowns."

The Lowdown:

The World Bank does its best to offer suggestions to get the world out of this quagmire. That might be the only bright part in this otherwise sobering assessment — the Bank says there is "growing recognition" of the steps that need to be taken. Chief among those is the need to restore confidence in the financial system and the demand for foreign trade. Most stimulus packages are designed to meet these two needs. More difficult to swallow might be the recommendation to up the "quantity and quality" of direct aid to developing countries, an area of the budget many countries are already slashing. The report makes it clear that developing countries are desperately in need this assistance during the recession to meet basic needs, but that's the problem — as the recession deepens, everyone else needs a hand, too.

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The future of human beings is what matters

9th March 09 - Luiz Inácio Lula da Silva, The Financial Times

For me, capitalism has never been an abstract concept. It is a real, concrete part of everyday life. When I was a boy, my family left the rural misery of Brazil’s north-east and set off for São Paulo. My mother, an extraordinary woman of great courage, uprooted herself and her children and moved to the industrial centre of Brazil in search of a better life. My childhood was no different from that of many boys from poor families: informal jobs; very little formal education. My only diploma was as a machine lathe operator, from a course at the National Service for Industry.

I began to experience the reality of factory life, which awoke in me my vocation as a union leader. I became a member of the Metalworkers’ Union of São Bernardo, in the outskirts of São Paulo. I became the union’s president and, as such, led the strikes of 1978-1980 that changed the face of the Brazilian labour movement and played a big role in returning democracy to the country, then under military dictatorship.

The impact of the union movement on Brazilian society led us to create the Workers’ party, which brought together urban and rural workers, intellectuals and militants from civil society. Brazilian capitalism, at that time, was not only a matter of low salaries, insalubrious working conditions and repression of the union movement. It was also expressed in economic policy and in the whole set of the government’s public policies, as well as in the restrictions it placed on civil liberties. Together with millions of other workers, I discovered it was not enough merely to demand better salaries and working conditions. It was fundamental that we should fight for citizenship and for a profound reorganisation of economic and social life.

I fought and lost four elections before being elected president of the republic in 2002. In opposition, I came to know my country intimately. In discussions with intellectuals I thrashed out the alternatives for our society, living out on the periphery of the world a drama of stagnation and profound social inequality. But my greatest understanding of Brazil came from direct contact with its people through the “caravans of citizenship” that took me across tens of thousands of kilometres.

When I arrived in the presidency, I found myself faced not only by serious structural problems but, above all, by an inheritance of ingrained inequalities. Most of our governors, even those that enacted reforms in the past, had governed for the few. They concerned themselves with a Brazil in which only a third of the population mattered.

The situation I inherited was one not only of material difficulties but also of deep-rooted prejudices that threatened to paralyse our government and lead us into stagnation. We could not grow, it was said, without threatening economic stability – much less grow and distribute wealth. We would have to choose between the internal market and the external. Either we accepted the unforgiving imperatives of the globalised economy or we would be condemned to fatal isolation.

Over the past six years, we have destroyed those myths. We have grown and enjoyed economic stability. Our growth has been accompanied by the inclusion of tens of millions of Brazilian people in the consumer market. We have distributed wealth to more than 40m who lived below the poverty line. We have ensured that the national minimum wage has risen always above the rate of inflation. We have democratised access to credit. We have created more than 10m jobs. We have pushed forward with land reform. The expansion of our domestic market has not happened at the expense of exports – they have tripled in six years. We have attracted enormous volumes of foreign investment with no loss of sovereignty.

All this has enabled us to accumulate $207bn (€164bn, £150bn) in foreign reserves and thereby protect ourselves from the worst effects of a financial crisis that, born at the centre of capitalism, threatens the entire structure of the global economy.

Nobody dares to predict today what will be the future of capitalism.

As the governor of a great economy described as “emerging”, what I can say is what sort of society I hope will emerge from this crisis. It will reward production and not speculation. The function of the financial sector will be to stimulate productive activity – and it will be the object of rigorous controls, both national and international, by means of serious and representative organisations. International trade will be free of the protectionism that shows dangerous signs of intensifying. The reformed multilateral organisations will operate programmes to support poor and emerging economies with the aim of reducing the imbalances that scar the world today. There will be a new and democratic system of global governance. New energy policies, reform of systems of production and of patterns of consumption will ensure the survival of a planet threatened today by global warming.

But, above all, I hope for a world free of the economic dogmas that invaded the thinking of many and were presented as absolute truths. Anti-cyclical policies must not be adopted only when a crisis is under way. Applied in advance – as they have been in Brazil – they can be the guarantors of a more just and democratic society.

As I said at the outset, I do not give much importance to abstract concepts.

I am not worried about the name to be given to the economic and social order that will come after the crisis, so long as its central concern is with human beings. 

The writer is President of Brazil. 

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