World Bank Cuts Growth Forecast for 2014

by Marilou Moursund on June 11, 2014

in Economic Indicators,Geopolitical,Recommended Reading

The bad winter weather in the U.S. that hurt growth in the first quarter is one of the factors leading to the World Bank’s lowered forecast for global growth. From the linked article: The World Bank on Tuesday trimmed its global growth forecast, saying a confluence of events, from the Ukraine crisis to unusually cold weather in the United States, dampened economic expansion in the first half of the year. The poverty-fighting institution predicted the world economy would grow 2.8 percent this year, below its prior forecast of 3.2 percent made in January, but it expressed confidence activity was already shifting to more solid footing. In its twice-yearly Global Economic Prospects report, the World Bank said tensions between Ukraine and Russia hit confidence worldwide. The bank also cut its growth forecast for the United States to 2.1 percent from 2.8 percent to account for the toll taken on growth by the weather at the start of the year. The U.S. economy contracted for the first time in three years in the first quarter, but it already appears to be rebounding. Stratfor had an interesting piece as well this morning about “The Power of Crowds” that ties in with the article above. You will have to register to read the free article, but I think it is very interesting. From the Stratfor article: When the history of the current Ukraine crisis is written, scholars will note that it began with demonstrations. The demonstrators were in significant measure young urbanites from the capital of Kiev, in search of a more Western orientation for their country. The European Union might be battered with a

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half-decadelong financial crisis. But the demonstrators, nevertheless, in large part saw the European Union in symbolic terms as a moral savior, promising a future of states governed by impersonal laws that treat everyone equally — unlike the future promised by Russia’s authoritarian leader, Vladimir Putin, and his local cohorts: that of nations, saddled with historical grudges, that seek glory for ethnic groups rather than rights for individuals. Cynics believed the demonstrations would peter out in the freezing cold Ukrainian winter, with insufficient public support. They were wrong. The demonstrators kept returning to Independence Square, also known as Maidan, toppling the pro-Moscow regime and changing European geopolitics. Demonstrators obviously don’t always get what they desire. The ’60s youth rebellion in the United States split the Democratic Party of the era and alienated many middle-of-the-road American voters — sometimes referred to as the silent majority — and thereby helped enable the presidential election of the conservative Republican, Richard Nixon. Many of the Iranian students who demonstrated in massive numbers against the repression of Shah Mohammad Reza Pahlavi in 1978 thought that they were enabling the future of a more democratic and accountable government. Instead, they got the suffocating autocracy, laced with terrorism, of the Shiite ayatollahs. The young Egyptian idealists, influenced by the values of cosmopolitan global culture, thought that their demonstrations in Cairo’s Tahrir Square in early 2011 would break the back of military tyranny. Instead, their protests led to an immoderate Islamic regime that, in turn, was toppled by another military tyranny. There are two major lessons here. Demonstrators, as numerous as they appear on the television screen — and in the eyes of the media in general — represent only a minute portion of the society, which may be with them or against them. And even if the society is with them, it does not mean that the same society has the social, economic and institutional traction for organizing itself into a version of the new political order for which the demonstrators yearn. Demonstrators often represent an educational elite, and an elite, well, by its very nature is not representative of the population at large, which, in the cases of Iran and Egypt, is composed of vast peasantries and proletariats prone to deep religiosity. The other lesson follows from the first: Just because demonstrators may be capable of undermining an existing order — whether the administration of Lyndon Johnson or the rule of the Shah or of Hosni Mubarak or of Viktor Yanukovich — does not mean that they have the capability of directing, or much less influencing, the emergence of a replacement order. For example, in recent times we have seen how social media can help depose regimes in the Arab world but is unable to foster the bureaucratic and institutional wherewithal to build better alternative ones.  

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