False economic optimism based on the apparent revival of economic activity in the major advanced capitalist regions has become the norm in world forums.
However, critical challenges need to be addressed before any real hope for growth revival.
Is this optimism justified?
There is little in terms of real change in policy orientation, and even lesser scope for internationally co-ordinated fiscal expansion.
But optimistic observers are basing their hopes on the belief that globalisation has been the driver of the current minor rises in world GDP growth.
But this ignores the fact that the role of cross-border trade in goods and services in pushing economic growth has changed since the global crisis.
Notably, in the period before the global crisis, trade increased faster than income every year.
But since then, not only has trade growth been much slower than that of income, but in several years, it did not grow at all.
How did the trade in goods fare?
Trade in goods was flat between 2011 and 2014, and fell in the subsequent 2 years, and even the projected recovery for 2017 doesn’t seem sufficient.
Since 2009, trade volumes have grown at less than half the rate achieved in the decade before the global crisis.
But even more significantly, trade unit prices have collapsed, showing zero change in SDR terms and absolute decline in US dollar terms.
While oil exporters were the worst hit due to the fall in prices, even non-fuel exporters among developing countries have scarcely benefited in price terms.
What lies ahead?
Trade trends and patterns of this type cannot be indicative of greater global economic dynamism.
Clearly, the current recovery will not be sustained unless trade expansion is also put on a more secure footing through concerted global efforts.
This will involve a fiscal push and more emphasis on higher wage incomes across the world as that is the only way to trigger demand.
