World looks to U.S. to spark recovery

While much of the world blames the United States for triggering the global financial crisis and recession, most nations also are looking to America to start pulling the rest of the world out of the slump.

A parade of foreign financial leaders in town for this weekend’s spring meetings of the International Monetary Fund and World Bank denounced the financial excesses on Wall Street that have cost millions of jobs and caused trillions of dollars in lost output from Detroit to New Delhi. Yet they also hailed some tentative signs of stabilization in the U.S. economy after a winter of free fall that led the world economy into its worst downturn in modern times.

“The beginning of the recovery has to come from the United States, and will come from the United States,” said IMF director Dominique Strauss-Kahn, reflecting widespread hopes that signs of improvement emerging in the United States this spring will blossom into a full-fledged global recovery by the first half of next year.

Mr. Strauss-Kahn and others were quick to add that “the crisis is far from over” and there are “still long months of economic distress in front of us.” But he hung his hopes on tenuous signs that U.S. consumer spending stopped falling early this year, while housing and a few other vital sectors more recently appear to be bottoming out after plunging to their worst levels in decades.

Global stock markets already have seized on signs of an impending U.S. recovery and staged solid rallies in the past month.

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The United States after World War II became the world’s main engine of growth, and it remains the world’s largest economy, though competing economic power centers have emerged in Europe and Asia. But despite sometimes breathtaking growth in China and other emerging giants in recent years, the global financial crisis has illustrated how central the United States remains to the world economy.

Economists say a reprise of the U.S. role as the engine of global growth may be even more vital today because of the increasingly dire economic conditions on every continent.

“The United States has been the epicenter of the global financial turmoil” that began here in the summer of 2007, said Jay H. Bryson, global economist at Wachovia Securities.

“Not only did the crisis begin here, but American financial institutions account for the lion’s share of $1.3 trillion in write-downs” for defaulting loans worldwide, he said. But perhaps because the crisis began in the United States nearly two years ago, prompting a long and deep recession that began in December 2007, the U.S. economy now is further along on the road toward recovery.

“The U.S. should be the first major economy other than China to experience growth,” and that will begin to pull along close trading partners in North America and Europe, which remain deeply mired in recession, Mr. Bryson said.

China’s economy has continued to grow throughout the crisis, fueled by a big spending program to rebuild infrastructure destroyed by an earthquake last year. China augmented that program after the financial crisis turned severe in October.

China’s buoyancy has helped to cushion the fall among its Asian trading partners, as well as among commodity exporters like Australia, Brazil and Canada that sell raw materials such as coal, oil and soybeans that the Chinese consume voraciously. It even has helped a few American firms like Caterpillar, which benefits from sales of heavy earth-moving equipment to China.

Chinese officials have recently trumpeted that they expect growth to pick up from a low of 6 percent in the first quarter to the double-digit rates China enjoyed earlier this decade, in what would be the first clear recovery by a major economy. But despite all its progress, economists say China still is unable to generate growth around the world like the United States does with its widespread wealth and army of 300 million consumers.

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