"History is one big laboratory experiment that only gets run once," Niall Ferguson muses to the New York Times today. Actually that's not quite true, responds Tim Fernholz. In the worldwide science project called Recessionomics, we're seeing many countries' labs experiment with a bevy of downturn-busting strategies. Let's see who's winning:
In Lab USA, which has experimented with a Keynesian stimulus plan and massive federal involvement in the bank system, we expect to see a bottom of the recession in the fall. Lab European Union, which has limited both its monetary and fiscal response, expects a recovery in the middle of 2010, and its GDP has contracted 50 percent more than the States, where the shock began. Keynes wins again?
It's easy to observe that countries like the United States and England, which have dumped billions and trillions of fiscal/monetary Miracle Grow policies on the recession, have been among the first to see green shoots, but Matt Yglesias is right to caution that the weeds of Europe's sluggishness could entangle the rest of the world. Such is the garden of globalization. End metahpor.
Tim brings it back to the day's news, noting that Geithner's meeting with the world's top eight economies in Italy provides the perfect opportunity to do a little show-and-tell. He could say something along the lines of this: "The situation is United States is dire, but improving. But things could be worse. We could be Italy."
Finally, here's a glimpse (via Krugman) at how England's output indices are fairing compared with the rest of Europe. If you can't read the graph, just know that the blue line is England. As of Jan 2009, the horses appear to be running in this order: UK, France, Germany, Italy, Spain.
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