AS THE WORLD TURNS
July 26, 2007
It's a dictum of the dismal science: "when America sneezes, the rest of the world catches a cold." But the International Monetary Fund's (IMF) most recent "World Economic Outlook" suggests that may no longer be the case.
While the United States remains a dominant force in the global marketplace, many countries, the report states, may be "decoupling" sufficiently from the American economy that they're gaining some protection from painful chain reactions. The IMF's researchers also suggest that America's disruptive impact may have been overstated:
- Past episodes of highly synchronized growth declines across the globe -- like those created by the oil-price shocks of the mid-1970s, or the bursting of the tech bubble in 2000 -- were not primarily the result of developments specific to the United States, but rather were caused by factors that affected many countries at the same time.
- One reason the global economy continues to hum along, even as growth slows in the United States is that America's current sluggishness is driven by slumps in its housing and manufacturing sectors, which have a limited effect on other major industrial countries.
Of course, it points out, given that America accounts for about a fifth of the world's economic activity -- a percentage that has changed little in the past 30 years -- its sneezes remain "relevant." But the rest of the world appears to be building a sturdier immune system.
Source: "As the World Turns," The Atlantic, July/August 2007; based upon: "World Economic Outlook: Spillovers and Cycles in the Global Economy," International Monetary Fund, April 2007.
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