Despite rallying the last couple days of the month, world stock markets lost about $7.5 trillion in January, amid fears of global recession. According to analysts, China’s economic growth has slowed to the range of six percent. Keep in mind, however, statistics from authoritarian regimes are suspect. What we do know is that the Shanghai Index is down 22.6% year-to-date. Emerging markets have been battered by falling commodity prices. The MSCI Index is, so far, down 14.9 percent. Brazil and Russia are in recession, if not depression. Europe’s economy is flat-lining, which comes as no surprise given the role of the state in the economy. Economic growth in the U.S. has been anemic – growing at two percent – since the end the “Great Recession” in early 2009. In fact, U.S. GDP growth has not exceeded 2.7% for ten years. Last Friday’s preliminary report on fourth quarter GDP showed growth at 0.7 percent. Free markets have been hamstrung by state intervention (i.e., healthcare, higher taxes, extraordinary low interest rates and increased EPA regulations). It has led to a loss of confidence, and a reduction in forward visibility.
Not even the 2800 delegates to the World Economic Forum in Davos (who, incidentally, flew in on 850 private jets) could lift expectations. Curiously, the theme of this year’s conference, which went from January 19th to the 23rd, was that the world is on the cusp of a fourth industrial revolution. It is generally acknowledged that the first industrial revolution began in England in the late 18th Century and extended into the second half of the 19th. The second, most would agree, began with Henry Ford’s development of the assembly line in early 1920s America. The third, according to The Economist in an April 2012 cover story, is the one we are currently in – artificial intelligence, genetics, 3-D printing, nanotechnology, robotics, etc., the same drivers mentioned two weeks ago in Davos as the fourth. It was not made clear if the business, banking, government and media elites who descended on Davos pulled a Rip Van Winkle, but world economic conditions suggest they haven’t been paying attention. Something is wrong.