Introduction
At the end of 2010 I was expecting global economic recovery, albeit at a reduced rate, to take place during 2011. A year later, this has not occurred and the risk of a double dip to the Great Recession is depressingly real. During 2011, however, the global dimension of the crisis has become more discernible, as spillovers to the emerging market economies and developing countries have grown exponentially. During last year, even the spectacularly growing BRIC economies have stumbled, particularly Brazil and India. Meanwhile China is coming under pressure to cap its growth with calls for it to appreciate its currency (Yuan) and play a greater role in correcting global trade and financial imbalances.
Two areas are of pressing concern. Firstly, the fragility of both private and public expenditure in the advanced industrialized economies. And secondly, the emergence of the Eurozone as the new geographic epicentre of the global crisis, replacing the United States. The fragility of private spending in rich countries resides in their current higher levels of unemployment, when compared to pre-crisis levels. Alongside this, the growth in wages has been marginal, thereby compounding the negative effects on private consumption of rising unemployment. In turn the decline in consumption has indirectly reduced private demand for investment expenditure and worsened the investment outlook.
As regards public spending, two circumstances presently rule. One is that Keynesian type stimulus spending in the rich countries has
