MUNICH — With the United States teetering into recession, the global economic boom has ended. The boom was unusually long and persistent, with four years of roughly 5 percent growth — a period of sustained economic dynamism not seen since around 1970.
The clearest sign that the boom is ending is the International Monetary Fund's forecast of 1.5 percent growth for the U.S. in 2008. That may not sound like a recession, but the Fund's marginally positive projection primarily reflects the growth overhang from 2007, with hardly any new contribution in 2008. It is compatible with three consecutive quarters of zero growth in 2008.
Many argue that a U.S. recession will no longer affect the world because China has supplanted America as an engine of the global economy. Wrong. Although China is growing fast, its economic power remains tiny. While the U.S. contributes 28 percent to world GDP, China accounts for only 5 percent. The whole of Asia, from Turkey to China, contributes 24 percent, less than the U.S. alone.