Michael D. Bordo and Thomas F. Helbling report that over time economic shocks have been transmitted more efficiently between industrialized countries, leading to a more synchronized international business cycle:
In this paper, we review and attempt to explain the changes in business cycle synchronization among 16 industrial countries and the over the past century and a quarter, demarcated into four exchange rate regimes. We find that there is a secular trend towards increased synchronization for much of the twentieth century and that it occurs across diverse exchange rate regimes. This finding is in marked contrast to much of the recent literature, which has focused primarily on the evidence for the past 20 or 30 years and which has produced mixed results. We then examine the role of global shocks and shock transmission in the trend toward synchronization. Our key finding here is that global (common) shocks generally are the dominant influence.
The problem here, it seems to me, is that as we’ve seen with a series of generally disappointing G20 summits the world’s advanced liberal democracies are not good at coordinating policy responses to economic shocks. This recession will end one day (hopefully sooner rather than later) but it won’t be the last one, and we’re going to need to do better.