Despite growing concern about the United States economy, it is not a dead weight dragging the rest of the world down into recessionary depths - at least, not yet.
It's true that turmoil in American stock markets has been matched by sell-offs in bourses around the world. And financial forecasters are scaling back expectations from some regions where the economic future lately seemed bright, such as Europe.
But the globalization revolution of the post-cold-war world has both linked capital markets more closely together - and fragmented consumer markets and sources of production. The world's economy remains too complex for any one nation to dominate its fiscal weather.
"I don't think that what goes on in the rest of the world is largely made in America," says Matthew Higgins, a senior international economist at Merrill Lynch.
Still, the spring of 2001 is clearly a delicate moment for fiscal policymakers around the globe. Everywhere stock markets are in retreat. It's not just the Nasdaq that's in trouble. Worldwide, stock markets are now some 20 percent below their 12-month highs, on average.
In the United States, the stock slump has yet to translate into actual recession. Some analysts believe the US will escape the year with slower, yet still positive, growth. A March Merrill Lynch estimate predicts a 2.1 percent GDP increase in the US for 2001.
The US economy is clearly cooling, however, after a decade of astounding performance. And that's happening as its fellow twin tower of global business - Japan - continues to stagnate.
Together, the US and Japanese economies account for more than 45 percent of world GDP. Yet it has been a long time since Japan has been called an engine of world anything. A burst real estate bubble, plus a protracted banking crisis, has now mired Japan in investment-sapping deflation. If its economy grows this year, it will be just barely.
Thus the question: Will US and Japanese stock markets feed on each other's gloom, and create a swirling whirlpool capable of sucking down share prices worldwide? And if that happens, will real economies - not just financial markets - follow?
The persistence of recent stock turmoil is indeed causing some analysts pause. J.P. Morgan, for instance, now expects global economic growth of 2.1 percent this year, down from 4 percent in 2000.
Not all gloom on world stage
But that still represents a forecast of growth. Overall, most economists think the world is in at least decent shape.
"International [developed world] economies remain healthy, with the exception of Japan," concludes a recent T. Rowe Price analysis.
That doesn't mean that weakness in the US business cycle wouldn't have some effect elsewhere. The most traditional measure economists use to gauge economic interdependence - direct trade - would surely suffer.
That, in turn, could spell trouble for Canada and Mexico. By some measures, fully 30 percent of Canadian GDP is accounted for by exports to its southern neighbor. The comparable number for Mexico is around 20 percent.
Elsewhere the effect would vary tremendously, region by region, and country by country. "Smaller Asian exporting countries like Korea are going to feel it much more than relatively large, diversified countries like Germany," says David Kemme, a professor of international economics at the University of Memphis.
But even Germany has seen its consumer confidence fall of late, and large firms such as Siemens announced that they will fall short of profit targets. Therein lies a question that this year is particularly crucial to world economic outlook: What will happen in Europe?
This was supposed to be the year when the Old World finally put the new to shame. For years, Europeans have looked on with envy as dotcoms lifted a US economy that seemed to have grown wings. But too many of those firms have proved more Icarus than Orville Wright, and with the euro single-currency experiment finally stabilizing, many analysts have picked Europe to enjoy the better 2001 business year.
Or maybe not. Some of the larger factors that have hurt the US, such as rising energy costs and a tech sector collapse, have hit Britain and the Continent as well. European industries are generally less energy-intensive than those in the US, and the tech sector is much smaller. But then there's that problem with all those cows.
"I wouldn't be surprised if Euroland is now growing more slowly than the US," says Mr. Higgins. "Leading indicators have declined just as sharply there as in America."
Some big European firms have likely been hurt by declining US exports. But overall, the EU is not Canada. Only about 3 percent of its GDP is created by shipping goods and services across the Atlantic.
Importance of stocks
What economists don't know is whether stock market turmoil is now more important a factor than it has been in the past. In both the US and Europe, equity investments have become much larger, relative to the overall size of the economy, in recent years. There's some evidence that new communications technology and the spread of round-the-clock trading is making stock markets move more in sync than they historically have.
For the US and Europe "the issue isn't so much a direct trade link ... as a capital markets link," says Higgins.
(c) Copyright 2001. The Christian Science Monitor