Whats Global Recession?

What is a global recession?

Many individual countries are now in recession, and the world economy is flagging badly. Leading economic organisations and business leaders are talking about "a global recession".

But it is not easy to define. BBC World Service economics correspondent Andrew Walker looks at the tricky business of working out whether we are in "a global recession".

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It really depends what you mean.

Even for national economies the word "recession" has more than one meaning.

It can apply to two consecutive quarters of declining output (GDP), a decline in annual GDP, or in the case of the US, it is the judgement of a committee of economists at the National Bureau of Economic Research.

But although there is more than one, these definitions are are widely used and understood.

That is less true of global recessions.

Some people are talking about one now, and for what it's worth, I have little doubt that by the end of this episode most people will agree that we have been through one. But what is it?

Different thresholds

Quarterly data are a problem at the global level. The International Monetary Fund (IMF) has concerns about the consistency across countries so it doesn't publish any quarterly global aggregates.

Whatever label we choose, the underlying reality matters a great deal to people who lose their jobs, have their incomes cut or whose business fails

So that brings us to annual figures and I have heard several different thresholds from IMF chief economists for judging whether a year counts as a recession.

Global output growth below 3%, 2.5%, and 2% have all been suggested.

Another idea is growth per capita of below zero. Global population grew at about 1.2% last year, which gives another, lower threshold.

Or some people just take recession to mean a very sharp slowdown in global growth.

There is also a wrinkle when it comes is adding up national output figures, in different national currencies.

The obvious thing to do is to use actual exchange rates, but that tends to make items produced in a developing country count for less than a similar item made in a developed one.

You can adjust for that by using made-up conversion rates known as Purchasing Power Parities, or PPPs.

If there is a global recession, it will be this year - let's hope no more than that.

So there are no real data. All we have to go on is forecasts.

The most recent one from the IMF is growth of 0.5% using PPPs, and minus 0.6% using market exchange rates.

If the forecast is right it's a recession by all those measures.

Political banana skin

But does it matter? For a journalist, it is more convenient to know for sure one way or the other.

Many people called 2001 a global recession, but the IMF decided it was a near miss. For the sake of balance I felt obliged to take account of that in how I wrote.

Whatever label we choose though, the underlying reality matters a great deal to people who lose their jobs, have their incomes cut or whose business fails.

It is also worth asking whether the word itself makes things worse, by depressing confidence.

It is arguable that when the National Bureau announced the current US recession, it added to the gloom on Wall Street - though it was a bad day for investors anyway.

There certainly is a history of wariness about using the R-word.

Last year the US Treasury Secretary Henry Paulson invented a new term - "down-climb".

It was such an odd choice that it really only succeeded in showing he was trying to avoid a nastier one.

In the more distant past, there's a story about a senior official in Jimmy Carter's US administration, an economist by the name of Alfred Kahn.

He was told off for frightening people by talking of recession and even depression.

So what did he do? Was he chastened?

No. He was witheringly sarcastic. He decided, the story goes, to substitute another word - banana.

The US was in danger of experiencing the worst banana in 45 years.

In a way it was a case of turning on its head a famous line from Shakespeare's Romeo and Juliet: "That which we call a rose by any other name would smell as sweet".

But this time it's not a rose that we can smell. It's an increasingly rotten banana.

Deffects in the Afghan-Pak Strategy of the US....

Holes in the US Afghan-Pakistan strategy Shahzad Chaudhry

Lahore, Pakistan - The affable US Secretary of State Hillary Clinton needs to pay close attention to the serious gaping hole in US President Barack Obama's "AfPak" (Afghan-Pakistan) strategy: the absence of a cooperative geo-political security regime in the larger Afghanistan-Pakistan-India region. The United States is in a unique and historical position in terms of its influence with all three countries. Pakistan holds the key to the long-term stability of South and West Asia. An unstable or socially fragmented Pakistan could mean an entirely unstable Afghanistan, regardless of the quality and expanse of democratic dispensation there. Inalienably, there is a need to provide a sense of assurance to Pakistan's 28 million Pashtuns, who live predominantly in the North West Frontier Province and the Federally Administered Tribal Areas of Pakistan. To achieve this, Pakistan itself needs to be secure and stable. This realisation is entirely missing from the proposed political construct the United States wishes to use to deal with the region. The United States' emphasis continues to be on a transactional relationship with returns from Pakistan. This irks the Pakistani sense of self-respect, national pride and dignity. Pakistan's nuclear status haunts the Western world, mostly for the wrong reasons. It is not the command and control mechanisms that should be of any serious concern; it is the insidious aspersions on the quality and character of the human resources engaged in the strategic programmes that betray a transparent and unsavoury attempt to demean Pakistan's credentials as a nuclear power. The United States does not understand the very strong sense of nationalism that the nuclear programme evokes in the Pakistani people, which in a strange paradox becomes a shield against any attempt to retrench, dislodge or dismantle its capability. Similarly, any effort to attach religious definition to Pakistan's nuclear capability is mala fide and a figment of the West's imagination. Pakistanis neither give the capability any religious association, nor do they accept such a classification. For the much larger majority, Pakistani nationalistic pride will override religious identification. More than the nuclear arsenal, it is the socio-political and economic instability of Pakistan that should haunt the world. If there is anything that triggers Pakistan's nationalistic sentiment more than its nuclear capability, it is events in the Indo-Pakistan context. By excluding India from the larger mosaic of declared American intent in its "AfPak" policy, Americans have denied themselves the assurance of a sustainable, secure and stable region. This is the missing kernel in the political stability equation for South Asia, and a major omission in the new strategy. Socio-political stability, lying at the heart of regional stability, is the key to forging a cooperative regional mechanism built around shared stakes and progressive, prosperous futures. Trade, food safety nets, energy corridors and enhanced connectivity can weave threads of interdependence in the entire region that can only augur a better tomorrow. To reach that end though, the prescriptive methodology will need to be replaced with an inclusive, cooperative framework, far different than what the new American establishment is currently willing to entertain. For America to be the honest broker, it is imperative that its own credibility within the larger region too is established without doubt. Two things can be done by the Americans straight away: one, provide a de facto acceptance of Pakistan's nuclear status by concluding a treaty similar to the one signed with India. This would lay to rest the bogey that American ambivalence to Pakistan is intended to bring into dispute Pakistan's nuclear assets, and that the United States wants to de-fang Pakistan of her nuclear capability. Second, the United States should use newly gained influence with India to encourage it to work with Pakistan to resolve long-standing issues. Since a solution to the Kashmir issue was nearly ready about two years ago, it may need just a little more attention. With a resurgent Congress in India and a reassured and more confident prime minister, Manmohan Singh, perhaps now is the time for the United States to help remove the biggest strategic roadblock in the Indo-Pak relationship. Without these two nations evolving their relationship on a more cooperative and even keel, a better future for South Asia can never be ensured. But, if that proves too sensitive as a triggering platform, the United States would do well to arbitrate the more pervasive issue of managing shared water resources. If these steps cannot be part of the US agenda, there is precious little that the United States can ever hope for beyond its transactional objectives. There too, the credibility of intent will always be seriously questioned on both sides. Even more disconcerting, the post-American environment will be greatly more fractious and unstable with newer issues coming to the fore. The American effort to expand, enlarge, re-equip and re-train the Afghan military – which may in future establish even deeper links with India – will place Pakistan in a crunch. This in turn is likely to push Pakistan into a corner. Pakistan can be more secure socio-politically only if it is included in regional and global linkages as a trusted partner and equal player. Prescriptive hierarchies will be the antithesis of a stable end-state that should be the prime international objective. It is imperative to understand the psycho-social make up of the Pakistani mind and its likely responses to emotive issues. What may appear clever can only have countervailing consequences. Transparency and cooperative engagement alone can move the region forward smoothly. ### * Shahzad Chaudhry (shahzad.a.chaudhry@gmail.com) is a security and defence analyst. This abridged article is distributed by the Common Ground News Service (CGNews) with permission from the Daily Times. The full text can be found at www.dailytimes.com.pk. Source: Daily Times, 25 May 2009, www.dailytimes.com.pk Copyright permission is granted for publication.