Wednesday , June 19 2024

Global Economy on the Rocks?

This article was written 30th April 2019, let it not be said that no-one could have foreseen the coming difficulties.

The most worrying indicator is global trade volume:

This has had the expected effect on global industrial production:

Notice that the downturn is affecting all economic regions this time around.  The long term picture of world trade puts the current downturn in context:

The current downturn may actually be more serious than that in 2008 because we can see from the recovery in 2009-10 that much of the 2008 downturn was about delaying trade transactions during a panic.  At present most people are unaware of the global fall in industrial production so the downturn is real and structural, not the child of panic.

My prediction is that global trade will not recover quickly but will spend a couple of years in the doldrums. Whether it then dips downwards or slowly rises is difficult to foresee.  There is no light at the end of the tunnel so I am inclined to the darker view, however, I would not bet on futures yet.  One thing that experience of these changes in the economy brings is an expectation that the economy will go its own way whatever our current data suggests so don’t be too depressed but don’t expect to get rich on the back of a rising economy over the next few years.

The Multinationals and International Banks will blame Trump but the downturn in the growth of industrial production in the 2010-20 decade has been predicted for 50 years.  The only big issue is whether it becomes a slump or levels out.  I am keeping my fingers crossed for the levelling out scenario (roughly the blue line on top of the page).

See An Update to World3 Model

More recent Global System Dynamics studies using software such as Modelica tend to confirm the results of World3. See for instance World3 in Modelica.

This post was originally published by the author on his personal blog:

About John Sydenham

Dr John Sydenham has worked in International Pharmaceuticals and for one of the "big four" International Consultancies. He ran a successful company for 15 years and after selling the company devotes his time to travel, science, black labradors and freedom.

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