Globalization Makes US Economy Recession-Proof?
The chart above (click to enlarge) shows annual world real GDP growth from 1980 to 2008 (IMF estimates growth of 4.8% for 2008), using data from the IMF, along with shaded areas of years during which the U.S. economy was in a recession. During the last four U.S. recessions (1980, 1982, 1990-91, and 2002), world GDP growth fell below 3%, and averaged only 2.1%.
Assuming that world GDP grows at the IMF's forecast of 4.8%, it would either be: a) inconceivable that the U.S. economy could go into a recession with such strong growth in the rest of the world, or at least b) unprecedented that we could suffer a recession while the world economy continues to grow at almost 5%.
I think it is worth considering that in previous U.S. recessions like in 1980, 1982 and 1990-91, there was no, little, or at least much less support from the global economy and emerging markets like there is today. For example, during those recessions, there was no support for the U.S. economy from countries like India, Brazil and China like there is today. And even compared to 2001, the world economy today is much stronger, more integrated, growing much faster; and the strong growth in the emerging markets is providing much more support for the U.S. economy than ever before.
Perhaps the dynamics of the U.S. business cycle are different now because of globalization, increased integration of world markets, and the unprecedented growth of emerging markets like the BRIC countries. Is it possible that globalization has made the U.S. economy recession-proof? At the very least, it's something to think about, and I don't think it has received much attention.