No matter what you think of the reliability of Chinese GDP statistics, the official announcement that economic growth in the fourth quarter of 2008 slowed to 6.8 percent is eye-opening. China recently upwardly revised its GDP growth estimates for 2007 to 13 percent, which means that, even by official measures, the rate of growth has fallen off a cliff. And there's good reason to believe that the 6.8 figure far overstates the reality. China may already be in a recession, according to some observers.
Certainly, countries that feed into the Chinese economy, like Taiwan and South Korea, are experiencing astounding slowdowns. Michael Mandel at BusinessWeek argues that an American recession could even lead to a Chinese depression, posing perhaps the greatest threat to Communist Party control in China in many decades. China may have the resources to stabilize its economy, but it's far too early to be complacent.
Which leads me to an oddly timed column by David Leonhardt in the New York Times on Tuesday, "The Economy Is Bad, but 1982 Was Worse." Leonhardt argues that the current crisis can't be called the most severe in the United States since the Great Depression, because we have yet to match the worst days of the 1981-82 recession. 90 percent of his column lays out this argument in convincing detail, until he spectacularly undermines whatever point he was trying to make by observing that if current problems continue to intensify "...and it will without a big stimulus package -- the economy really could end up in worse shape than it's been in more than 60 years."
Well, yeah. At every point over the last two years, there have been economists and business reporters and politicians and even How the World Works readers who have taken a snapshot of the economy as it currently existed at that point and argued that, you know, things are not so bad. But that kind of contextual framework isn't useful when formulating plans for the future. The more important question is: Where are we headed?
So today, we learn that Microsoft is laying off 5000 workers, an unprecedented event for that company, new housing starts dropped sharply for the sixth straight month, and new jobless claims spiked way up. Intel is closing manufacturing plants and Sony is reporting record losses. The banking system appears more feeble than ever. Right now, I think most observers of the U.S. economy would concede that we have yet to reach the nadir of the current recession. Even worse, the cascading effects of the slowdown that has already occurred in the U.S. are only now bringing global economic growth to a standstill. So worse is in store, for everyone.
If you are looking forward, it seems pretty obvious that the most pressing question faced by the Obama administration is whether the proposed recovery plan will be big enough to turn things around. Making the argument that we have yet to hit the low point of the worst recession since World War II seems a fairly irrelevant exercise.
Unless, perhaps, you are a Republican legislator determined to cripple the new administration's attempts to fix things.