Every Economic Recovery in the World Looks the Exact Same—and That Stinks

More

Screen Shot 2012-10-09 at 5.50.55 PM.png

That graph above? It should feel familiar. It's a snapshot of our great muddle of a recovery.

The line tracks a measure of U.S. economic health from 2003 to today, accounting for GDP and indicators like employment growth, consumer confidence, and the stock market. It's a story of slowish growth, followed by a deep plunge, a heartening bounce-back (especially for financial markets) and, finally, the muddle.

That's America's story, but it's not exclusively an American story. It describes just about every advanced economy's two-step recovery: (1) Bounce back and (2) Back to zero. That has been the story for Canada, held back by a weak U.S.; for Australia and Japan, held back principally by a weakening China; and for the strongest economies in Europe, which are buying fewer goods from China, which is hurting Australia, and around we go.

As the Brookings Institution reported this month, the advanced world's economic recovery is sliding toward stagnation, in unison. [What's this "overall growth index? Scroll to bottom.*]

Screen Shot 2012-10-09 at 5.40.47 PM.png

Screen Shot 2012-10-09 at 5.41.18 PM.png

Screen Shot 2012-10-09 at 5.46.18 PM.png


Screen Shot 2012-10-09 at 5.45.40 PM.png

Screen Shot 2012-10-09 at 5.46.48 PM.png

Screen Shot 2012-10-09 at 5.48.30 PM.png

Just because each country is tracing the same sickly line doesn't mean we're all suffering from similar maladies. Europe is uniquely constrained by a common currency that's working well for nobody. Australia is battling a Chinese slowdown. The U.S. is proving that it's hard to grow without a housing market.

These crises are wide-ranging, but the upshot is that the world economy needs a power engine. After the Great Recession, China passed a monster stimulus, Brazil went right ahead with its borrowing, and world trade was surprising buoyant considering the scale the global housing and equity meltdown. That's one reason why export growth returned so quickly to the U.S., Canada, and Europe. But today, every strong economy is getting weaker at the same time, and when you look around the world, it's hard to see an emergency booster engine lying in wait.

WO-AL345_Recess_G_20121008183014.jpg

As the WSJ beautifully graphed today, the odds of a recession are climbing everywhere and the expectations for growth are falling everywhere. In fact, if any country is likely to provide a surprising boost to the world economy in the next year, it's ... right here, in the U.S., where residential investment finally seems ready to climb out of its five year hole and improve the earnings and spirits of the world's most largest national engine of consumption. For the world's sake, we should hope for a housing recovery very, very soon.

______________

*Brookings methodology [pdf]: Overall growth = Business Confidence, Consumer Confidence, Employment, Exports, Imports, Industrial Production, GDP Growth, Equity Markets, Credit Growth, Ted Spread (difference between the interest rates on interbank loans and short-term U.S. government debt).

Jump to comments
Presented by

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

Get Today's Top Stories in Your Inbox (preview)

CrossFit Versus Yoga: Choose a Side

How a workout becomes a social identity


Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus

Video

CrossFit Versus Yoga: Choose a Side

How a workout becomes a social identity

Video

Is Technology Making Us Better Storytellers?

The minds behind House of Cards and The Moth weigh in.

Video

A Short Film That Skewers Hollywood

A studio executive concocts an animated blockbuster. Who cares about the story?

Video

In Online Dating, Everyone's a Little Bit Racist

The co-founder of OKCupid shares findings from his analysis of millions of users' data.

Video

What Is a Sandwich?

We're overthinking sandwiches, so you don't have to.

Video

Let's Talk About Not Smoking

Why does smoking maintain its allure? James Hamblin seeks the wisdom of a cool person.

Writers

Up
Down

More in Business

Just In