The Spectacular, Sudden Crash of the Global Economy

The worldwide economic meltdown has sent the wheels spinning off the project of building a single, business-friendly global economy. 

Worldwide, industrial production has ground to a halt. Goods are stacking up, but nobody's buying; the Washington Post reports that "the world is suddenly awash in almost everything: flat-panel televisions, bulldozers, Barbie dolls, strip malls, Burberry stores." A Hong Kong-based shipping broker told The Telegraph that his firm had "seen trade activity fall off a cliff. Asia-Europe is an unmit­igated disaster." The Economist noted that one can now ship a container from China to Europe for free -- you only need to pick up the fuel and handling costs -- but half-empty freighters are the norm along the world's busiest shipping routes.  Global airfreight dropped by almost a quarter in December alone; Giovanni Bisignani, who heads a shipping industry trade group, called the "free fall" in global cargo "unprecedented and shocking."

And while Americans have every reason to be terrified about their own econopocalypse, the New York Times noted that everything is relative: 

In the fourth quarter of last year, the American economy shrank at a 3.8 percent annual rate, the worst such performance in a quarter-century. They are envious in Japan, where this week the comparable figure came in at negative 12.7 percent — three times as bad. 

Industrial production in the United States is falling at the fastest rate in three decades. But the 10 percent year-over-year plunge reported this week for January looks good in comparison to the declines in countries like Germany, off almost 13 percent in its most recently reported month, and South Korea, down about 21 percent. 

Chinese manufacturing declined in each of the last five months; according to the Financial Times, "More than 20 [million] rural migrant workers in China have lost their jobs and returned to their home villages or towns as a result of the global economic crisis." The UN estimates that the downturn could claim 50 million jobs worldwide, prompting Dennis Blair, the U.S. National Intelligence Director, to warn Congress that, "instability caused by the global economic crisis had become the biggest security threat facing the United States, outpacing terrorism." 

Riots, strikes and other forms of civil unrest have become widespread the world over; governments have fallen. In Europe, parties of the far right and left have seen their fortunes rise. 

The model of economic globalization that's dominated during the past 40 years is, if not dead, at least in critical condition. Few progressives will mourn its demise -- it was both a proximate cause of the economic meltdown in which we find ourselves today, and one of its victims. But if we are reaching the end of an era, questions arise about not only what will replace it, but also how we'll finance the government spending that most economists agree will be required to stave off a long, painful depression. 

Always a Flawed Model 

For almost 40 years, smooth-talking snake-oil salesmen in well-tailored suits have pitched the wonders of a globalized economy. Politicians and pundits alike insisted that the wealthy states at the core of that worldwide economy could shift labor-intensive production to the poorer countries at the edges, in search of a cheaper pair of hands and less nettlesome regulations, and that ordinary working people would benefit. Whatever pain Americans might feel as a result of the project was merely temporary “displacement,” they argued, and anyway those cheap toys at Wal-Mart more than offset any problems that might come along with the decimation of America’s middle class. After all, a little lead never hurt anyone.