According to British Prime Minister Gordon Brown, the global economy still faces the real prospect of falling even deeper into recession. Patrick Wintour, political editor for The Guardian, said in a recent piece that the Prime Minister intends to address his concerns before the latest G8 summit scheduled in Italy July 8-10.
Brown considers global complacency to be the preeminent threat of a recovery, as far too many media and government outlets have already begun to claim that the downturn is over. It is popular to say that things are getting better, but most indicators still show a continued and prolonged slowing of the global economy. The worst hit is the United States with a financially and consumer dependent economy, but others have been caught in the wake of the sinking American giant.
The only countries that have actually found benefit and growth in this downturn are China, India, and a few other developing countries which focus heavily on manufacturing. Even in those cases the growth is not optimal though it is still obviously preferable to contraction.
What Brown fears is a so-called W-shaped recession. His fear is shared with famed NYU economist Nuriel Roubini who predicted the financial downturn more than two years ago. In such a recession all indicators show a pronounced and rapid decline, followed by a short recovery period and yet another period of decline.
When the economy finally bottoms for the second time it is in worse shape than it previously was. After the cataclysmic upheaval of the global trade and financial system in the past year, it is hard to imagine the situation getting much worse, but that is precisely the problem faced today.
The United States, which will have representation at the upcoming G8 summit, would be wise to take heed of Prime Minister Browns advice and take prompt action to alter its economic course. During the last global meeting of the minds, the G20 summit in London last April, President Obama firmly planted the American flag on a policy of maintaining the old façade. Now is the time for prompt change and progressive economic action.