The World Economy—Where Is It Heading?
Where Is It Heading? What Will It Mean for You?
“YOU just don’t know how hard it is making ends meet,” says Ann. True, her middle-class home is lovely, but the mortgage payment is almost heart stopping. And though her husband’s paycheck is substantial, inflation has chiseled away at its value. “Every week prices creep up,” Ann says, “while my shopping money stays the same.” She thus feels squeezed by unrelenting pressure. “I’ve offered to take on a part-time job,” she sighs, “but he doesn’t want me to.”
On the other side of the world, an African farmer named Alion faces similar frustration. Government controls have set prices so low that his work of tilling and planting is simply unprofitable. In times past, Alion says, “everybody would try to plant more than the next farmer. Now, everyone settles for growing the same.” It just isn’t worth the extra effort of growing more produce.
Anxiety and despair are the legacies of our troubled economic times. And no doubt you, too, are affected, regardless of what part of the world you live in. The future seems obscured by question marks: ‘Should I buy now before prices go up? Should I invest what little savings I have? Can I even trust that the banks are a safe place to deposit my money?’
Such concerns are not mere paranoia. In the United States, for example, 1982 saw more banks close than any other year since 1940. Bankruptcies were ominously close to the all-time peak reached during the Great Depression of the 1930’s. Towering interest rates had choked the life out of businesses, large and small. And the problems are by no means confined to any particular country. ‘So just where is the world economy heading?’ you might ask in frustration.
Frankly, no one really knows whether tomorrow will bring news of an economic rally or further retreat. The economy is just too unpredictable. Yet we can authoritatively predict where the world economy is headed in the long run. To do this, however, we must look beyond wage-price spirals and balance-of-payment deficits and search out the real causes of today’s problems. Nevertheless, it would be helpful first to take a brief look at some of the economy’s external problems.