The World Bank's chief economist called Monday for a "Marshall Plan" to help rebuild the global economy in the manner of the massive US aid plan for Europe at the end of World War II. "Considering the global crisis we are in now, I think we should be more aggressive," World Bank chief economist Justin Yifu Lin told a Washington conference.
"We need to be more imaginative. And I'd like to propose a global recovery fund in the spirit of Marshall Plan." Lin proposed that high-income countries, with the leadership of the United States and reserve-rich countries like China and oil-exporting countries, pledge two trillion dollars for the five coming years for the effort.
This amount, around one percent of the economic output of the wealthy nations, could be used "to help the low-income countries to participate in this global co-ordinated fiscal stimulus." He said the World Bank still sees a recovery in 2010, but noted that "there are many, many uncertainties" and that "the downside risk is really high."
"The economy is likely to be trapped in a kind of vicious circle," he said, with declines in profitability leading to job cuts and reductions in consumer spending. "This recession, this crisis is likely to be protracted. If you look at the collapse in the equity market, in the real estate market, and their consequences on the real economy, it's like a Great Depression." The global lending organisation in December predicted world growth of just 0.9 percent in 2009 as trade volumes drop 2.1 percent.