Has the World Economy Recovered?

As American firms hire more people and Europe avoids a Greek catastrophe, there are signs that the global economic is recovering. Countries need to take cautiously optimistic action. 

What's the Latest Development?

As the world economy shows signs of resiliency, perhaps the best news is coming out of the US. The good news may be both cyclical, as unemployment and underemployment are falling and consumers are spending more, and cyclical, as the economic drag from the housing bubble begins to wane. "More jobs have been created in the three months since November than in any three-month period since 2006." The nation's economic growth is forecast at 2.5 percent this year, which is not a boom, but understandable given debt-laden governments and households. 

What's the Big Idea?

In the short term, there remain threats to a global recovery, such as an oil supply crisis instigated by Iran. Over the long term, governments should focus more on creating economic growth than on cutting budgets, since growth is the best way to generate the revenue needed to pay down government debt. China's economy, which has helped sustained world markets while the West imploded, must be reoriented toward creating more domestic consumption. To do that, pensions and health spending should receive more funding than infrastructure. 

Photo credit: shutterstock.com

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