Nations Spend in Tandem To Stall Global Recession

In a bid to jump-start the beleaguered global economy, countries around the world are introducing massive public spending programs aimed at creating millions of jobs, boosting the use of green energy and modernizing infrastructure in a way that could transform urban and rural landscapes.

The viability of some of the plans remains unclear. But observers say the number of countries moving in tandem underscores the perceived severity of the coming global recession and the view that governments must at least temporarily pick up the slack as the hard-hit private sector sheds jobs and cuts spending.

It is time "to invest massively in infrastructure, in research, in innovation, in education, in training people, because it is now or never," French President Nicolas Sarkozy said in a recent public address.

World leaders are pursuing a variety of strategies to tame the economic crisis, including moves to unclog credit markets, strengthen financial institutions and ease monetary policy. But fiscal stimulus packages, in particular, have emerged as a favorite tool of policymakers. Some countries' plans are particularly bold: China is accelerating projects to build more nuclear power plants and a vast natural gas pipeline; Italy may erect the first bridge connecting Sicily to mainland Europe.

This past week, the European Union called for member countries to spend $258 billion to spur growth; France, one of the bloc's largest economies, is expected to announce a huge package next week. Britain has already unveiled a $30 billion proposal, and Spain a $14 billion plan.

In Washington, President-elect Barack Obama has said his administration would create or preserve 2.5 million jobs over three years. While he hasn't said how much his "economic recovery plan" would cost, some lawmakers have floated the possibility of a package of as much as $700 billion.

Worldwide, economists say, the increase in public spending, if executed wisely, could add as much as 1 or 2 percent to global growth next year, perhaps easing recessions in the United States, Europe and Japan while cushioning the slowdown in the developing world, which had until recently seen red-hot growth.

Yet if the promise of combating a global recession with public funds is big, so too, experts say, is the danger that billions worth of taxpayers' dollars could be spent in vain.

Analysts point out that the pitfalls of growth-by-spending were exposed by Japan, which launched a huge infrastructure program in the 1990s. To spur expansion after stock market and real estate crashes, the Tokyo government spent billions of dollars on public works projects. Those projects not only failed to prevent a decade-long economic slump, but produced a herd of white elephants including new, but little-used airports and ports, as well as a $250 million bridge to Kourijima Island. Population: 361.

"There is a huge danger of bridges to nowhere, and as Japan showed us, that is no way to get out of a recession," said Grant Aldonas, a former high-level Bush administration trade official and a senior fellow at the Center for Strategic and International Studies.

While China and Japan enjoy a surplus of reserves, spending increases will drive the United States, Britain and many other European countries deeper into debt. The cost of raising cash on world markets by some rich nations, such as Ireland, has surged as investors grow increasingly skeptical of their fiscal health, limiting their options to spend more now.

"In normal times, we would be telling countries, 'Please reduce your debt,' " said Olivier Blanchard, chief economist at the International Monetary Fund, which has taken the unusual step of calling on nations to raise public spending by 2 percent of gross domestic product to combat a global recession. "But these are not normal times."