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To: Bobby Yellin who wrote (16906)	8/29/1998 2:47:00 PM
From: goldsnow	Read Replies (1) \| Respond to of 116823

Global recession -- don't let it get you down 01:17 a.m. Aug 28, 1998 Eastern By Sarah Davison HONG KONG, Aug 28 (Reuters) - Falling prices, market meltdowns, fears of global recession -- they are no reason to get depressed, according to the dismal science of economics. A senior Hong Kong economist, speaking as the world's markets dived on fears of a global downturn, said the ''Great Depression'' of 1873-96 proved economies could grow despite deflation. But it requires the ability and willingness of nations to adapt, Indosuez W.I. Carr chief economist Michael Taylor told a business audience on Thursday. ''Despite being called the Great Depression, we would not have got depressed, we would have found it the single most monumentally exciting period in world economic history,'' he said. ''This was a period where you had falling prices and colossal change, and colossal growth,'' he added. Unlike the 1930s global depression, growth in the late 19th century Great Depression was maintained, Taylor said. The U.S. population nearly doubled, consumption in the United States and Europe soared and trade grew rapidly, he added. He said there were compelling parallels between the Great Depression and the economic crisis ignited by Asia last year. The combination in 1873-96 of rapid technological change, huge productivity gains and an increasingly globalised market looks very familiar to today, he said. The onset of global deflation was heralded by a collapse in financial markets in the newly industrialising countries of the time -- Continental Europe. Today, with retail prices falling in China and the risk of deflation also taking hold in Japan, fears are rising that deflation could again spread throughout global markets. But Taylor said not to worry, deflation was perfectly compatible with technological change, globalisation and growth. But growth with deflation does require the willingness to adapt to ''massive wrenching change'' at corporate, economic, financial and political levels, he added. ''We should attempt to assess Asian countries' fortunes in an age of deflation by their willingness and ability to foster change,'' he said. ''In very few cases is it plausible that Asian countries will be able to harvest the sort of returns to intellectual capital which will continue to characterise the 'new economies' of the West.'' Britain, which assumed an even larger share of the global economy in 1873-96 than the United States today, took two years to succumb to the recessionary forces of the Great Depression. Even then, it managed to escape all but the mildest of recessions, largely because it showed flexibility, adapting to the change wrought by global deflationary pressures, he said. Taylor said deflation back then was driven primarily by the opening of the American prairies, which dragged food prices sharply lower for an extended period. In Britain rural areas rapidly depopulated as farms became unprofitable, with fresh labour moving into cities and combining with new technology. The result was a boom in mass consumption, despite peristently falling prices, and this supported growth. Britain resisted a global trend towards raising tariffs to protect its farming sector, ensuring the rapid development of this ''new economy'' -- even though it displaced the aristocracy. Taylor described the modern Chinese workforce as the likely equivalent of the American prairies of the past, and said the Internet could well shrink the world in the same dramatic way as the opening of the Suez Canal did over a century ago. Rising protectionism is expected now as it was back then, with countries attempting to resist change. But ultimately, wealth will be redistributed as ''new economies'' evolve, he said. David Scott, regional strategist for Indosuez W.I. Carr, said consumer goods companies, commodity-consuming industries and tourism would be likely beneficiaries if a global deflationary cycle developed. Copyright 1998 Reuters Limited.