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The World Economic Crisis

A Commonwealth Perspective

image of The World Economic Crisis
‘The interdependence of the world’s economy is now so strong that there would be a good case for collective action even in times of prosperity and growth; in the crisis now prevailing the case for joint action is compelling. Change is inevitable. The issue, as we see it, is whether the structural changes and adjustments necessary to solve the current economic crisis and the problems of development will be accompanied by economic confusion and chaos, with each nation struggling in isolation to maximise its own gain, or whether they can be achieved in harmony on the basis of a global consensus for the mutual benefit of all nations.’ - From the Report.



‘The global economic crisis has deepened and there is now considerable pessimism about the ability of nations to control world economic trends. The Group of Experts has highlighted the grave economic consequences of the present situation for the peoples of the world, particularly those in the developing countries... (and) puts forward a number of specific practical measures directed towards achieving a more equitable, prosperous and stable world society.’ - From the Foreword by Commonwealth Secretary-General Shridath Ramphal.

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The Balance of Payments Problem

It is a truism that the sum of the balance of payments surpluses and deficits on the current account of all countries must be zero. In other words, when there are current account surpluses (such as those run by OPEC today), there are counterpart deficits that will have been financed and which exactly equal the surpluses. This equality obtains ex-post in any single year's accounting; in fact, it only indicates that the surpluses will have been lent or ‘recycled’ to finance the deficits that actually occur.

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