In 1929, days after the stock market crash, the Harvard Economic Society reassured its subscribers: “A severe depression is outside the range of probability“. In a survey in March 2001, 95 percent of American economists said there would not be a recession, even though one had already started. Today, most economists do not forecast a recession in America, but the profession’s pitiful forecasting record offers little comfort. Our latest assessment suggests that the United States may well be heading for recession, reported Economist.com.
Granted, GDP grew by a robust 3.9 percent, at an annual rate, in the third quarter. Granted also, revisions may well push this figure up. But that was the past. More timely signs suggest that the economy could stall in this quarter. By early next year, output and jobs could be shrinking.
The main cause is the imploding housing market. Experts said that house prices could never fall nationwide. But fall they have, by 5 percent in the past 12 months. Residential investment has collapsed, but a glut of unsold homes means that prices have much further to drop. Americans’ spending is likely to be dented much more by a fall in house prices than it was in 2001 by the stock market’s collapse. With house prices lower and credit conditions tighter as a result of the subprime crisis, households can no longer borrow against capital gains to support their spending.
Dearer oil is set to squeeze households further. Consumer confidence has already fallen sharply. It cannot be long before consumer spending stumbles, which in turn would hurt companies’ profits and investment. The weak dollar will boost exports, but at only 12 percent of GDP, exports are too small to make up for a weakening of consumer spending, which accounts for 70 percent.
will an American recession drag the rest of the world down with it? The economies of Europe and Japan rebounded strongly in the third quarter, but look likely to slow down. Although both should be able to keep chugging along, neither is likely to set any great pace. Strengthening currencies will hurt exporters in both places. Europe’s own housing hotspots are cooling, and some of its banks have been sideswiped by America’s subprime ills.
The best hope that global growth can stay strong lies instead with emerging economies. A decade ago, the thought that so much depended on these crisis-prone places would have been terrifying. Yet thanks largely to economic reforms, their annual growth rate has surged to around 7 percent.
This year they will contribute half of the globe’s GDP growth, measured at market exchange rates, over three times as much as America. In the past, emerging economies have often needed bailing out by the rich world. This time they could be the rescuers.
Of course, a recession in America would reduce emerging economies’ exports, but they are less vulnerable than they used to be. America’s importance as an engine of global growth has been exaggerated. Since 2000 its share of world imports has dropped from 19 percent to 14 percent.
Its vast current-account deficit has started to shrink, meaning that America is no longer pulling along the rest of the world. Yet growth in emerging economies has quickened, partly thanks to demand at home. In the first half of this year the increase in consumer spending (in actual dollar terms) in China and India added more to global GDP growth than that in America.
Most emerging economies are in healthier shape than ever. They are no longer financially dependent on the rest of the world, but have large foreign-exchange reserves--no less than three-quarters of the global total.
Though there are some notable exceptions, most of them have small budget deficits (another change from the past), so they can boost spending to offset weaker exports if need be.
This does not mean emerging economies will grow fast enough to make up for the whole of a fall in America’s output. Most of them will slow a bit next year: for instance, China’s growth rate may dip to “only“ 10 percent. So global growth will ease--which, after five years at an average of almost 5 percent, close to its fastest pace ever, it needs to do. But thanks to the vigor of the new titans, it will stay above its 30-year average of 3.5 percent.
The rising importance of the world’s new giants will not only boost growth. It will also shift relative prices, notably those of oil and the dollar. And the consequences of this will be less comfortable for developed countries, especially America.

Although separated by the Atlantic Ocean, Angola and Brazil are united by language and their centuries-long history as Portuguese colonies, and trade between the two countries is booming as never before.
According to Ipsnews.net, Brazil, Latin America’s giant, whose 188 million people and 8.5 million square kilometers represent more than half the area and population of South America, appears determined to take over from Portugal as chief investor in the group of African Countries of Portuguese Official Language (PALOP).
In his less than five years in government, Brazilian President Luiz Inacio Lula da Silva has visited Africa seven times, easily outstripping his predecessors JosŽ Sarney (1985-1990), Fernando Collor de Mello (1990-1992), Itamar Franco (1992-1995) and Fernando Henrique Cardoso (1995-2003).
South Africa and Nigeria are also important trading partners of Brazil’s in Africa, but the PALOP group of countries, made up of Angola, Cape Verde, Guinea-Bissau, Mozambique and Sao Tome and Principe, has become one of the top priorities in Brazil’s political and economic diplomacy.
Angola, with an area of 1.25 million square kilometers and over 15 million people, is Africa’s second biggest oil-producer after Nigeria. The destruction of almost all of its towns and cities, during the 1961-1974 struggle for independence from Portugal and the 1975-2002 civil war, turned it into a vast field of business opportunities.
Trade relations between this West African country and Brazil started to grow in 2000, during the Cardoso administration, but since Lula took office in January 2003, Brazilian investment has skyrocketed.
The Association of Brazilian Companies in Angola (AEBRAN) says that trade between the two countries has risen six-fold since 2002 and is still growing fast.
At present, according to information from AEBRAN which was confirmed by the Banco do Brasil, Angola is the country receiving the greatest amount of export financing from Brazil.
At a seminar in Luanda in September, on the occasion of celebrations marking 185 years of Brazilian independence from Portugal, Angolan Finance Minister JosŽ Pedro de Morais said that the volume of financing from Brazil received by Angola was 475 million dollars in 2005, and had grown to 750 million dollars in 2006.
In an interview with the Portuguese-African weekly Africa 21, Brazilian journalist Raimundo Lima, a spokesman for AEBRAN, said that “Angola is the country that receives the most financing from Brazil, as over half the funds of the Program for Export Financing (PROEX) administered by Banco do Brasil last year went into the Angolan economy.“
Brazilian exports to Angola increased from 520 million dollars in 2005 to 836 million dollars in 2006, and in the first nine months of 2007 they were 14 percent up from the same period last year.
Angola is Brazil’s fourth largest market in Africa, following South Africa, Nigeria and Egypt, according to Foreign Ministry statistics.
Brazil sells Angola mainly machinery, home appliances, car parts, tractors, equipment for telecommunications and the oil industry, and even gasoline, due to the lack of fuel refineries in the southwestern African nation.
In exchange, Angola’s exports to Brazil--basically crude oil--were worth 460 million dollars in 2006. The presence of Brazilian companies in Angola has expanded on a par with the increase in trade--a trend that according to AEBRAN points to a promising future.
The number of Brazilian companies in Angola has increased by 70 percent over the last five years. The firms are mainly involved in public works, sales of construction materials, project design, real estate and food.
Brazilians are thus beginning to flock to a country which, in spite of the historical and linguistic links, was virtually an unknown quantity until just over a decade ago.
The 5,000 Brazilians registered in Angola work mainly for construction, mining and agribusiness companies, in the provinces of Cabinda, Lunda Norte and Malanje as well as in the capital, Luanda.
For years there have been very few Brazilian professionals and technical experts in the PALOP countries, where Portuguese expatriates have predominated. But rather than displacing the former colonizers, the South Americans are reinforcing their numbers, “a very welcome development,“ according to Portuguese Deputy Foreign Minister Joao Gomes Cravinho.

The main problem in the fight against poverty and unfair income distribution is the lack of effective policies.

An employment package that modifies unemployment benefits and hiring policies has been completed, with Turkey’s Minister of Labor and Social Security Faruk Celik will open the package up to evaluation by employee and employer representatives in the coming days, after which it will be sent to Parliament for approval.
According to Todayszaman.com, the package includes measures such as increasing unemployment payments and their accessibility; compensation of disabled employees’ insurance premiums by the Treasury; a reduction in insurance payments for newly hired employees between the ages of 18 and 30; the removal of the obligation to hire previously convicted persons and on-site doctors.
Apart from this direct measure, the government will also increase funds to vocational education for training the unemployed. The government will additionally allocate approximately YTL 500 million for vocational education.
The package, which is in the Cabinet’s three-month emergency action plan, is expected to be passed in Parliament and implemented at the beginning of 2008. With the new package, the unemployment insurance fund will be restructured. Until now, only a limited part of the fund has been used.
From now on there will be more payments to the unemployed and it will be easier to apply for unemployment payments. The bottom and top level of the monthly unemployment compensation will be YTL 300 and YTL 630, compared to the current YTL 210 and YTL 419.
The current social security law stipulates that companies which employ more than 50 people have to employ previously convicted individuals, the disabled and victims of terror.
Such individuals need to make up at least 6 percent of the company’s employees. The employers are fined YTL 1,226 every month if they do not hire former convicts. It is known that many companies hire 49 insured employees and the rest uninsured and unregistered in order to circumvent this law. The quota for disabled individuals has been kept in the package, but their insurance premiums will be compensated for by Treasury. The package removes the obligation to hire on-site doctors as many companies opt to outsource medical care services.
Social benefit payments per person must be 40 percent of national income per capita in order to fight against poverty, according to the State Planning Organization’s (DPT) Income Distribution and Anti-poverty Commission report.
The main problem in the fight against poverty and unfair income distribution is the lack of effective policies. The report said for the solution of the problem, social benefits and services must be settled for those who have income lower than the per capita income.
The report also revealed that there must be extra benefits aside from those addressing standard of living such as allowances for rent, children and families. It also recommends benefits for the disabled elderly and dependents.
The report strongly underlines that social benefits must be collected under the roof of a single institution and must be regulated from there. Another reason for poverty and inequitable income distribution was a high unemployment rate and an unregistered economy. “To this end, employment strategies and policies must be set for social communication and cooperation,“ the report said.