For something like 6 years now, mainstream media has been harping on about a "global financial (or economic) crisis'. But what exactly is the evidence for this?
It is true that Western economies have slowed down and some have suffered from various levels of recession for some time, but what exactly makes their plight a "global' one? Even among Western countries there is great variation, as Germany, Austria and Norway attest.
In order to demonstrate the point, let's look at the economic growth figures published by the World Bank for various countries. The data source used can be found here.
In order to give a fair picture of the situation, we will look at the period 2005-2011. This should give a fairly acceptable 7-year trend analysis covering 3 years before and 3 years immediately after the so-called "crisis year' in 2008.
And we are looking at the GDP growth figures, which are generally accepted as a good indicator of economic activity, particularly in terms of overall production. It is true that "production' is only half the story, as "distribution' is just as important in terms of economic health of the general population. However, the picture of distribution (i.e. how exactly the wealth generated is shared among the population) has, unfortunately, not changed much over the period in question, so it does not impact the analysis.
And since there are over 200 countries involved, we will limit our analysis to broad geographical groupings like East Asia and Pacific, Europe & Central Asia, Latin America & Caribbean, Middle East and North Africa, North America, and Sub-Saharan Africa.
But before reviewing the full period in question, let us look at the worst year first: year 2009 when the impact of the 2008 Western financial crisis was most harmful in GDP terms. The World Bank figures give a total "world' GDP contraction of 2.2%. It certainly looks bad. However, this is the only year in the 7-year period in question when there was such a net contraction in the "global' economy.
Average global GDP growth for the full period stands at 2.5%. Not a contraction, but an average global growth of 2.5% every year, for 7 years. Moreover, the world economy grew by 1.3% in 2008, and by 4.4% in 2010. In fact global growth in year 2010 was higher than any other year in the period.
The so-called "global' contraction in year 2009 in fact was not global at all either. Let's first look at the GDP growth rates for various regions in 2009, the worst year in question:
As can be seen from the World Bank's own GDP figures, the worst year of the so-called "global economic crisis' really only saw negative growth in 3 regions alone, namely Europe, Latin America and Caribbean, and North America. In terms of geography, this certainly was not a global recession - nowhere near it in fact.
Looking at it in terms of world demographics, it is clear that the great majority of the people in the world did not experience a downturn, even in year 2009. In fact, East and South Asia grew by as much as 7.5% in the same year. This would account for almost a half of the world's population. In other words, in year 2009, half of the world's population was experiencing a major economic boom. And it does not stop there. There was positive economic growth for another 20% or so of the world's population living in the Middle East and Africa, which grew by around 2%.
So how is that a 4% drop in Europe, Central Asia and North America together with a 1.6% drop in Latin America and Caribbean in year 2009 can lead to an overall 2.2% in world GDP despite such noticeable growth elsewhere? The answer is to do with the enormous size of their economies. This is where the game of mathematical averages distorts the truth. The greatest part of the world's population experienced a major positive growth in their national economies in 2009. But because they started with a smaller GDP size, news of their success was buried under the weight of failure elsewhere.
Now let's look at the full 7-year period's (2005-2011) trends for the same geographic categories. And for the purpose of providing a useful comparator, we will also review figures for a 7-year period a decade earlier, namely 1995-2001. This would allow us to see exactly to what extent the "global crisis' actually differed from a situation just a decade earlier. It also takes care of the "inflation' counterargument that will no doubt be raised by some in the sense that demonstration of improved performance compared to a decade earlier helps to prove this article's central point: the world economy has been booming for the great majority in the world, just as the mainstream media claims a "global crisis'.
A look at the above table should demonstrate to all objective observers that the notion of a "global' economic crisis in the period 2005-2011 is simply absurd. The East Asia and Pacific region grew by an average of around 10% a year for 7 consecutive years over 2005-2011, beating its own performance a decade earlier (7%). South Asia has grown close to 8% a year over 2005-2011, compared to 6% a decade earlier.
To put these numbers into perspective: this means that in a period of just 7 years, the wealth of South Asian nations increased by 67% over 2005-2011. For East Asia & Pacific nations (excluding Japan), their wealth grew by 90% over the same period.