The increasing fragility of the world economy has prompted the expression of concerns about the monetary policy of central banks and global financial institutions based on cuts in the money supply, reductions in public spending and high rising interest rates. Inflation in most of Europe is close to zero, but unemployment among the Euro-11 is 10.7 percent. Japan's economy is turning into a shrivelled raisin. Prices are dropping across much of east Asia, including China. Russia remains a basket case, and the outlook in Latin America is poor to bad.
American consumers are about the only large group of people in the world who are diligently buying.
It would be only a slight exaggeration to say that American consumers have become the engine of the world economy. But given the fate of German finance minister, the neo-Keynesian Oskar Lafontaine, and the failure of such measures in Japan, these policy prescriptions are looking increasingly threadbare. Since the high point of economic expansion in the 1960s, economic growth in each decade has been around one third lower than in the preceding one. In other words, even in the 1970s, when world capitalism was beset by deepening recession and the problems associated with the quadrupling of oil prices, economic growth was higher than in the 1990s. Rather those peculiarities are a particular expression and combination of general tendencies at work within the world economy as a whole.