Austerity addiction hobbles wealthy countries' race to recovery
This has not been a good recovery for the wealthy countries. Growth has lagged, in part because government spending has been far more restrained than in past recoveries from major recessions.
But developing economies have been free to increase government spending and their economies are generally growing more rapidly than they did after past recessions.
Data released last week by the International Monetary Fund in the semi-annual World Economic Outlook show the stark differences in performance.
Comparing changes in real gross domestic product per capita in developing countries and advanced economies since 2008, including the fund's forecasts for this year and next year, shows that in every year the developed countries have lower growth. The monetary fund forecasts that this year the increase in the US will be a paltry 1 per cent, which at least is better than the forecast for the eurozone and Britain, where declines are expected.
A major reason for the slow recoveries is the absence of fiscal stimulus in much of the developed world. The data covers trends in government spending in advanced economies and in developing ones, comparing the trend during the current recovery with an average of the recoveries after three previous world downturns - in 1975, 1982 and 1991. In each case, the figures treat the year before the downturn as zero and show how earlier and later years differed from that year.
In emerging markets, spending this time has been much stronger than in previous recoveries. But the opposite is true for developed countries, as a group and for each of the four major regions - the US, the eurozone, Britain and Japan.
Those changes reflect the determination to follow a path of austerity in much of the developed world. Many developing countries, having built up foreign exchange reserves in the years before the recession, do not need to follow that course.
The great recession brought a drop in world trade volumes that exceeded any decline since the Depression but the percentage declines were a little less in developing countries than they were in developed countries. Since then, the recoveries have been far more impressive in the less developed countries.
In the eurozone, the total level of imports has still not recovered to 2007 levels, although the IMF says it thinks that will happen next year. The same is true of exports from Japan, a country whose export prowess once seemed unmatched but lately has been running trade deficits.
Among these four developed regions, only the US has experienced an export revival that is comparable to that of the average emerging market.