Global Value Chains, the Crisis, and the Shift of Markets from North to South
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Table 4.6 Changes in Trade and Savings for Major Economies, 2008–09 Current account balance (percentage of GDP) Country
2008
2009a
Germany
6.4
Japan
Gross national savings (percentage of GDP)
Trade (percentage change in $ value June 2008/09 year to year)
2008
2009a
Imports
2.9
26
20
33
34
3.2
1.9
27
23
26
24
United Kingdom
–1.7
–2.0
15
12
31
31
United States
–4.9
–2.6
13
11
24
–0.29
Exports
Source: International Monetary Fund (IMF) World Economic Outlook (WEO) and Direction of Trade Statistics (DOTS) database, November 2009. a. Estimated by IMF WEO.
However, the outcome of falling consumption in most northern economies has been a sharp rise in unemployment almost everywhere, with aggregate employment in the OECD falling by 2.2 million between the second quarters of 2008 and 2009 (Holland et al. 2009), and unemployment growing to exceed 10 percent of the labor force in the United States in late 2009. It has also led to a sharp fall in exports in major surplus economies (table 4.6). In June 2009, Germany’s exports had declined by 34 percent and Japan’s by 24 percent compared to the same period in the previous year. China, too, saw a fall in employment after global trade fell significantly in the first year after the financial meltdown (13 percent fall in exports between June 2008 and June 2009). This decrease in output in the North, and increase in unemployment—both arising out of falling personal consumption—have been met by a massive “saltwater Keynesian” injection of funds through bank bailouts and quantitative easing in most of the deficit economies, fueling a “freshwater” response warning of the dangers of inflation. Although not historically unprecedented, government debt as a share of GDP has risen sharply in almost all economies as actual (and projected) fiscal deficits have grown (table 4.7). Without this growth in government expenditure, there is little doubt that the almost unprecedented large fall in output and rise in unemployment would have been substantially greater. As a result, there has been some revival in economic activity, with both the United States and the European Union (EU) (but not the United Kingdom) moving out of recession (in the sense that output stopped falling) in the final quarter of 2009 and China’s exports being revived. Virtually no observer doubts the reflationary