The World Bank’s Worst Case

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The World Bank is pessimistic. They’ve reduced their 2012 growth forecast for Europe by 2.1 percentage points and for other rich countries by about a point. But this is only their mildly pessimistic scenario, and it assumes that the crisis in the eurozone is reasonably well contained. But what happens if it isn’t? Here you go:

In a second scenario (box table 4.2) the freezing up of credit is assumed to spread to two larger Euro Area economies (equal to around 30 percent of Euro Area GDP), generating similar declines in the GDP and imports of those economies. Repercussions to the Euro Area, global financial systems and precautionary savings are much larger because the shock is 6 times larger. Euro Area GDP falls by 6.0 percent relative to the baseline in 2013. GDP impacts for other high-income countries (-3.6 percent of GDP) and developing countries (-4.2 percent ) are less severe but still enough to push them into a deep recession. Overall, global trade falls by 2.6 percent (7.5 percent relative to baseline) and oil prices by 24 percent (5 percent for food).

So there you have it. If the eurozone crisis turns out to be worse than we think, growth in the EU will be nearly 6 points below their last forecast and growth in other rich countries — including us — would be more than 3 points below their last forecast. That’s enough to send us skittering back into a recession regardless of whether our economic fundamentals are in good shape or not.

How likely is this? That’s more a political question than an economic one, which makes it more than usually difficult to forecast. Against all odds, I still think that European leaders understand the stakes and will avoid the worst once they run out of all other choices. But I’m not sure what odds I’d put on that.

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WHO DOESN’T LOVE A POSITIVE STORY—OR TWO?

“Great journalism really does make a difference in this world: it can even save kids.”

That’s what a civil rights lawyer wrote to Julia Lurie, the day after her major investigation into a psychiatric hospital chain that uses foster children as “cash cows” published, letting her know he was using her findings that same day in a hearing to keep a child out of one of the facilities we investigated.

That’s awesome. As is the fact that Julia, who spent a full year reporting this challenging story, promptly heard from a Senate committee that will use her work in their own investigation of Universal Health Services. There’s no doubt her revelations will continue to have a big impact in the months and years to come.

Like another story about Mother Jones’ real-world impact.

This one, a multiyear investigation, published in 2021, exposed conditions in sugar work camps in the Dominican Republic owned by Central Romana—the conglomerate behind brands like C&H and Domino, whose product ends up in our Hershey bars and other sweets. A year ago, the Biden administration banned sugar imports from Central Romana. And just recently, we learned of a previously undisclosed investigation from the Department of Homeland Security, looking into working conditions at Central Romana. How big of a deal is this?

“This could be the first time a corporation would be held criminally liable for forced labor in their own supply chains,” according to a retired special agent we talked to.

Wow.

And it is only because Mother Jones is funded primarily by donations from readers that we can mount ambitious, yearlong—or more—investigations like these two stories that are making waves.

About that: It’s unfathomably hard in the news business right now, and we came up about $28,000 short during our recent fall fundraising campaign. We simply have to make that up soon to avoid falling further behind than can be made up for, or needing to somehow trim $1 million from our budget, like happened last year.

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