Are the IMF’s forecasts too pessimistic?

That’s the headline for my recent piece in Inside Story, responding to statements from the IMF that “the world is about to experience the worst recession since the Great Depression”. My complaint isn’t so much about the numerical estimates made by the IMF (which are actually optimistic) but about the framing in terms of the Great Depression. It’s almost certain that we will see a larger decline in global income and output in 2020 than we did in the GFC year of 2008. However, if things are managed well, we should see a substantial recovery in 2021, unlike the years of austerity that followed the GFC in many countries. The comparison is also distorted by the fact that growth rates in China and India have been slowing for some time for reasons independent of the pandemic.

8 thoughts on “Are the IMF’s forecasts too pessimistic?

  1. My only quibble and it is just that, is the issue of hoarding. In the GFC in the USA there was sizable hoarding by large corporations most notably APPLE Inc. Now hoarding after the COVID-19 pandemic may not be overridden by government stimulus measures. The only way to combat hoarding is to impose a tax on super normal profits. But there will be no such tax in Australia under the LNP government tax agenda. So if there is hoarding by big corporations like Telstra and BHP the velocity of circulation of money may be adversely affected. If that happens then the recovery will be more like what we witnessed in this country in the period 1990 to 1992. Admittedly Real GDP did take off again after that two year period of stagnation; so John Quiggin could still be right about this post COVID-19 recovery being nothing like the Great Depression. My only fear is that hoarding is so very hard to counter. Also if its being done by large corporations it can reduce Net Private Final Investment. But then maybe I am just being a classic dismal scientist.

  2. Who gives a truck about whether or not there is a recovery. The priority should be on crushing demand. Then if the demand can not be crushed the priority should be on crushing the people who push demand as they are clearly a near term danger to other innocent people.
    Of course schools need to be reopened for the next semester at the latest. A phase two is badly needed to crush demand with some sort of rationality. I shudder to think about what the future holds if there is no phase two.

  3. We can increase demand for picnics. We can increase demand for rationality. We can increase demand for take out resturants with in walking distance. We can increase demand for Indian and Vietnamese and Persian and Turkish and Arabic cooking. We have to make sure that German Bakeries and Pastry shops survive. We can demand the Return of Fargo.

    We can demand that the next season of Fargo is about a man who comes to Minneapolis who learns to fly an airplane but not land it and who the local FBI investigates and sends a report to Washington were nothing gets done with it. The story would continue with a Russian FIS agent taking a job with a continuing criminal enterprise in Minneapolis run by a wealthy woman by the name of Ms. Moriarity who works as an economics proffesor at the University of Minnesota to cover her real occupation of criminal mastermind. While working with Ms. Moriarity to achieve a monopoly on parking garages and large parking lots in the midwest, from Milwuakee to Kansas City. The FIS agent comes in to contact with the FBI agents and learns of their disappointmentat the way their report was handled. He uses that information to recruit the agents in to a more professionally run agency.

    In the following season one of the recruited FBI agents comes in to contact with the Heinsberger Drug Empire which leads him in to contact with disillusioned agents of the German BND and the disillusioned Czech intellegent Agents who all combine and decide to create a world wide rogue intellegence agency to save to world from unscrupulos knuckleheads. Eventually the Central Committee of this organization would be located in Central Minnesota in the nuclear bomb proof bunker of an NGO which was originally designed to hold the true and original cross that Christ was crucified on, and a letter written from Jesus to his mother from northern India that outlined the Buddhist training that he was recieving there, or so the members of this NGO actually believed. The season would end when the Preacher shows up looking for sancturary from the outlaws that were released from hell on that series. The final scene is of the four horsemen of the apocolypse riding past a light house on the shore of Lake Supirior and seeing a road sign that says Duluth 13 miles.

  4. And now you know why President Bumpen no longer refers to the Coronavirus as the China Virus but refers to the virus as the invisable enemy instead. The Shadow knew.
    Enjoy your picnic.

  5. This post goes to the issue of the right-wing belief that we can simply return to market fundamentalist, business-as-usual normalcy on the other side of this particular crisis. A number of ecological thinkers have mentioned the serious problem of pushing demand (consumption) back to a level which is ecologically unsustainable once this crisis is over. This a key issue which must be addressed in the democratic socialist push for a just and sustainable economy.

    I want to move on and address the issue of the “power law”. The power law may be defined as follows. “In statistics, a power law is a functional relationship between two quantities, where a relative change in one quantity results in a proportional relative change in the other quantity, independent of the initial size of those quantities: one quantity varies as a power of another.” – Wikipedia.

    The power law is often shorthanded as the 80-20 law or even as “the law of the one percent in economics”. A pseudo-scientific or pseudo-philosophical but essentially ideological argument is advanced by supporters of the status quo which states that because the power law is a fundamental law observed in cosmology and ecology (which is true from the sizes of stars to the sizes of living entities on earth) then this means that a highly unequal distribution of wealth in an economy is only to be expected, It is right, natural and inevitable.

    Where power laws appear to apply in economics (in terms of sustaining and generating ever worse inequality) these are a result of a particular application of sociopolitical power which acquiesces to, rather than fights the natural or fundamental power law. The 20% of persons with the most power and wealth have 80% of the influence on political economy decisions by the government. It may even be worse than that with the 1% of wealthy individuals having the most power by far.

    There are several cosmological and natural (fundamental) laws which human activity fights against. The “law of human mortality” is fought against. We strive to survive as long as possible. The law of human mortality is really just a special case of the law of entropy acting on our gene telomeres (the protective ends of gene strands) and leading to ageing and death. We strive to fight against the law of entropy and its many effects, continually in life and in economics, by means of using energy and materials to do useful work. Life itself is defined in key ways by this fight.

    Life is contra (against) entropy almost by definition, even though entropy wins eventually. We win for a little while and have our place in the sun for a little time. If life is contra entropy (and we have a choice to fight or succumb) then it follows that just and equitable life is contra the power law. Thus we must fight the power law just as we fight the law of entropy. The fight against entropy grants life for a time. The fight against the power law grants human-life justice and equality for a time. Stating that, because a law is a natural law we must simply acquiesce to it, can be an ideological and anti-life position not a human life-affirming and human justice-affirming decision. Life and equality-for-all demand, if we want them, if they are part of our ethic basis, that we fight against the law of entropy AND the power law.

  6. To talk about how or when to get the economy running again is not even the correct use of human language.
    Those who are not puppets of the simulation would correctly be asking how do we reestablish sustainable human life on earth. Once they answered that question they then might ask the question, would such a sustainable life be enjoyable. If the answer is not really then the question of can we improve our first answer to make life enjoyable might come up as a third question.

  7. Samsara an ancient Pali word that was through the design of ancient Ayatollaisattvas created to form an acronym thousands of virtual years ahead of its time. The word Samsara means Same Attitude Means Same Action Repeated Again in Pali and its acronym in English works just as well.
    Samsara is a vice that our spieces is saturated with, especially those in military professions.
    That we continue to talk about how and when to keep the ECONOMY running rather than how we should transform our lives shows is a perfect example of the vast presence of samsara in our spiecies.
    At a minimum if a person must speak economically they should be asking how we can transform our economy and how we can transform our political system to support that economy. And how we can trnsform our education system to support that economic and political system. And on and on to all of the sub systems that support us.

  8. When you really think about it, it would be very appropriate to name every warship of the navies of the US; UK, and Canada, the Samsara followed by a number. (USS Samsara 1…, HMS Samsara 1…)

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