Economists have begun describing the current financial crisis as a "worldwide recession." They point to signs like Iceland needing help from the International Monetary Fund and factories in China shutting down. In Japan, Toyota recently announced its first operating loss since 1941.
But if you look around the globe, it can be hard to believe that every last country has been affected. This crisis began with mortgages in the U.S. How could it have spread to the last square inches of the planet? Aren't there any places that remain clear of trouble?
"Sure there are," says Ian Bremmer, president of the consulting company Eurasia Group. "And they're some of the most interest places."
Bremmer points to the oil-rich Persian Gulf states as an example. Sure, the price of crude has fallen a lot. But those nations are better off than another petroleum-rich country, Venezuela. That's because it costs the South American nation a lot more to produce its oil.
"Venezuela actually runs a deficit when oil gets under $90 a barrel," he says. "In the Gulf states, you basically stick a straw in the sand and oil comes out. It's a lot cheaper."
The Gulf states are still doing well enough in the downturn, because they're a one-trick pony with a very good trick.
Another way to escape the global crisis would be to live somewhere totally isolated. You could go to a remote village in the Amazon or the mountains of China and find people who haven't heard the words "sub-prime mortgage" and haven't been affected by the financial turmoil. But it turns out most countries depend on other countries for something. Cambodia, for instance, sells the U.S. a lot of pajamas.
Ken Rogoff, an economist at Harvard University, says that if he had to pick one major economy that's not as affected as it might be, he'd choose India.
"India is a relatively closed economy," Rogoff says. "It has much more trade restriction than other countries. If you want to import a laptop, you have to fill out all sorts of papers. Putting money into India is incredibly difficult."
Despite offering call center support to the rest of the world, India is somewhat insulated economically. Isolation protects a country from the worst of a global recession, but it's not a strategy Rogoff recommends.
"They have a lot of poor people in India," he says. "A lot of it has to do with cutting themselves off from the world."
If you want another perspective, try the World Economic Outlook, published by the International Monetary Fund. The report lists one country with a bright forecast, Liberia. Gross domestic groduct there is predicted to jump from 8.6 percent growth in 2008 to 14.3 percent this year. But Liberia is a special case, because it's emerging from a civil war.
Charles Collins, deputy director of the IMF's research department, cautions against taking the numbers at face value. Collins says most are being revised downward.
"We're seeing substantial slowdowns throughout the world," he says. "We are expecting most industrial countries to contract severely in 2009 — in fact, the largest synchronized downturn really in the postwar period."
Collins describes the current economy as in the throes of a massive crisis, one with many tentacles. He blames both the drop-off in consumer demand and the credit crunch. "If it doesn't get you one way, it will get you another way," he says.
Trade and financial markets tie the nations of the world together, with people and institutions in one country investing in another. They lend each other money, or they used to, before the crisis.
Asked whether the trouble would have spread so far and so fast without modern globalization, Rogoff laughs.
"The Great Depression was very similar, in that the United States was the epicenter," he says. "We had this incredible boom, the Roaring '20s. We handled it very badly, and it collapsed. We took the rest of the world down with us."
That collapse happened in a world tied to together by trade and financing. The issue then was simpler than today's dizzyingly complex derivatives and mortgage-backed securities. Back then, the problem was that nations had all pegged their different currencies to a single marker: gold.
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