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The IMF, which in January had forecast the
global economy to grow by just 0.5% in
2009, now predicts a contraction. Developed
countries will see their economies shrink, while developing countries will grow,
but a much slower rate than what was earlier projected. Extreme measures, such
as nationalization of banks are being contemplated
by the US and other developed economies. This won't be continued in the long run. It is
very essential to check the meltdown with effective
and efficient measures.
An economic recession is a feature peculiar to industrial economies. In agrarian economies,
too, there were such catastrophes, but these were mostly due to natural calamities, such as
drought, floods, and epidemics. There have been
recessions every eight or ten years since 18th
century's Industrial Revolution but recoveries
followed shortly. There was, however, one Great Depression, which lasted from 1929 to 1939.
It was ended only by the Second World War, which claimed 50 million lives. The War
generated massive demand for armaments, supplies
to armies and affected civilian populations, and capital for reconstruction.
Obviously, identification of the causes would help in finding long lasting solutions, or at
least mitigating the immediate impact of the crisis.
So far, there has been no unanimity on the factors responsible for the crisis.
Lack of Purchasing Power: The principal cause
of an economic recession is the lack of sales,
which, in turn, is due to the decline in purchasing
power of the masses. There are other causes, but these
are incidental. A large part of the world's
population is so poor that it hardly has any
purchasing power. Even the developed countries have
many poor people.
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