Faisal Islam travelled to Singapore, one of the world’s largest ports, and manufacturers in Liverpool to see how the trade system is shuddering to a halt.
The head of the World Bank Robert Zoellick told Channel 4 News that the decline in trade was the worst for 80 years.
Just outside Singapore harbour you could see how rapidly the world economic crisis has moved beyond dodgy mortgage and bank bonus.
Cargo ships and transporters in the waters outside Singapore – the world biggest parking lot – showed the fruits of a calamitous collapse in industrial production around the globe.
In 2008 the shipping industry was booming on the back of soaring world trade and China’s manufacturing exports and raw material imports.
Cargo rates, ship rentals and the price of ships were all going one way until last autumn, said one of the world’s leading shipping financiers, then collapsing trade left hundreds of ships surplus to requirements in the waters around the world’s major ports.
In Germany, the global trade collapse saw exports drop by more than a fifth in January 2009. In the same month, Chinese exports fell by more than a quarter. And Japan saw its exports collapse by 46 per cent.
It was this trade collapse more than anything that led to the president of the World Bank, Robert Zoellick, issuing a dire warning.
“I think in the world economy we are in a dangerous situation,” he told Channel 4 News. “I expect that you’re going to see growth actually drop this year which would be the first time since 1945, it really takes you back to the 30s.
“I think the trade numbers decline will be the greatest in 80 years.”
The worst trade collapse since the Great Depression has grown out of the worst financial crisis since then. Part of the problem was that trade finance – letters of credit that cover goods in transit – dried up as banks run away from international risks.
In May 2009, Bank of England monetary policy committee member Andrew Sentance talked exclusively to Faisal Islam during a tour to see the impact of recession on the frontline in Liverpool.
It was too soon to be talking about the green shoots of economic recovery, according to this member of the Bank of England’s committee that sets interest rates.
Now that rates can go down no further, his votes helped the creation of £125bn of new cash that was poured into the economy to keep spending going.
“We have to get to a point where the economy stops contracting before it begins to recover,” he said. “Therefore, I think the first thing to look for is a slowdown in the rate of decline, an indication that things are bottoming out.”
The stops on this investigative tour included a manufacturer of copper tubing for the plumbing industry, a discount retailer which sells major grocery brands cheaply, and a breakfast with Merseyside’s young professionals.
“The other thing I am also looking out for particularly is the extent which companies are seeing what is going on at the moment as temporary and they still have confidence in the longer term prospects for their businesses,” Sentance said.
He said the worst of the collapse in output may be behind us, but there were threats to the strength of any recovery.
“I would be hopeful that we will see a recovery starting later this year or in 2010,” he said. “The evidence I’ve seen on this visit is, I think, still consistent with that.”