Different business cycles and regional diversification have generally ensured that when one part of the world slows, another center has been able to pick up the slack. But the accelerated globalization of markets, firms and industries in the 1990's means world business cycles are more closely intertwined, leaving the world more susceptible to common shocks. And a potent cocktail of rising global interest rates in 1999 and soaring energy costs, tumbling equity prices and a world technology slump in 2000 appear to have combined to engineer a world slowdown in 2001. The problem is that when all ships begin to sink, there is no one left to throw the world a lifeline. International Monetary Fund Managing Director Horst Koehler this week said the world economy was slowing much faster than expected.
Many private analysts have lower forecasts, and expectations are clearly headed down.
In the 1990's, the booming United States was the backbone of global stability as Japan drifted in and out of recession, financial crises roiled Southeast Asia and Latin America, and Europe slogged ahead with lukewarm growth. But Japan's economy is again at the brink, and a number of analysts see the United States at real risk of contraction in the first half of 2001. The two powerhouses together comprise more than 40 percent of world output. Add mounting troubles in Asian nations reliant on Japanese and U.S. export markets and investment capital, and some 55 percent of the world economy is in the doldrums. Europe is in better health, but is starting to stumble and looks an unlikely candidate to do the world's heavy lifting.