More equal than others?

David Smith, the economics editor of the Sunday Times, made an interesting point at this morning’s Investment Summit session on the co-ordinated international character of the economic crisis. “Everybody has turned down dramatically together,” he said.

Generally such crises are not co-ordinated: some countries do badly while others continue to perform relatively well. But this crisis has seen a decline in global output accompanied by a widespread downturn in manufacturing and trade.

However, because it has been synchronised so far does not necessarily mean it will continue to be so.

The heavily export-dependent countries are likely to experience different problems from those with domestically focused troubles. Germany and Japan have both felt the pain of severe falls in export volumes. Yet both economies suffered from house price bubbles far less than most other developed nations. America and Britain, in contrast, had particularly bloated financial sectors but were less dependent on export earnings for their overall economic health.

There are clearly important linkages in the world economy, but it does not necessarily follow that the trajectories of all the large economies will be the same.