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But what does it mean? Economic experts describe the end of the beginning of bad times.

Find the interviews linked here:

• Louis Kuijs on China
• Shanta Devarajan on Africa
• Kyoji Fukao on Japan
• Allan H. Meltzer on the United States
• Jim O'Neill on emerging economies
• Robert Reich on the United States
• Edwin Truman on the United States and Europe

The worldwide recession may be nearing bottom or lifting, some data suggests. The rate of job losses has slowed. Financial and credit markets have eased. Ambitious stimulus plans seem to be working.

But these metrics hardly provide a qualitative understanding of what the world faces in the short to medium term -- the next six to 24 months. What does the end of the recession really look like? And how will we know when we get there?

Foreign Policy surveyed the latest thinking and contacted top economic experts to get a better picture of the shape of things to come. We asked them to take out their crystal balls, assess whether the recession is lifting, and discuss what's too often left out in the sometimes Pollyannaish press stories on "green shoots."

Their consensus? The end of the recession looks much like the recession itself. We are at the end of the beginning of bad times.

On this page, you'll find condensed versions of their assessments and warnings. Read on to find the interviews, which were lightly edited for clarity and slightly condensed.

China

The winner of the crisis. Beijing faces challenges in ensuring the correct type of growth. But China looks to be the world economy's only real bright spot for some time in the future.

"I think China's had an extremely good crisis. It's been good for China. It was very obvious to a few people, including some important policy people in Beijing, that the massive export growth of the past decade or so was just not sustainable on a permanent basis; it was heading for a collision anyhow. And in that case, something needed to change, so in some strange way the crisis has been convenient because it's allowed them to make dramatic monetary and fiscal policy changes." -- Jim O'Neill, head of global economic research for Goldman Sachs

"The World Bank is not all that optimistic, over two years. China is a large economy, but quite integrated in terms of trade and inward FDI. So, what has happened now is: exports are still the main drag on growth. They're very important for China, in terms of the importance of growth, more important than in India or Brazil...exports are important and will continue to be mediocre. What's kept growth up is stimulus.

"But you cannot undertake this large a stimulus for too many years in a row. Even China can't undertake a stimulus next year. In terms of momentum, when we look at next year, we don't really expect it to accelerate. It will grow respectably." -- Louis Kuijs, senior economist for the World Bank in China

Japan

The situation in Japan -- which has an aging population, a gutted pension program, and specialization in unwanted high-tech exports -- seems especially fragile.

"Japan's recession started because of a sharp decline in Japanese exports. But the decline of exports has slowed down and the manufacturing sector activity has declined sharply, as did imports. That has a positive effect on GDP. Because of these factors, the negative growth has slowed down. That's why the Bank of Japan says we're at the bottom.

"But our GDP is much lower, 10 percent lower, than what we can produce. So, still our situation is very bad. And, the problem is, what will be the engine of recovery? I don't know." -- Kyoji Fukao, professor at the Institute of Economic Research, Hitotsubashi University

Africa

With aid, investment, and commodity prices set to fall, the fallout of the global recession may be particularly harmful on the world's poorest continent, rolling back years of development successes.

"Basically, the African financial sectors were spared the initial round of bank failures and financial sector turmoil because African banks weren't that integrated and weren't dealing in derivatives and CDS and those sort of things. But when it turned into a real world economic crisis, when there was recession in developed countries, that immediately had a major impact on African countries on four main channels -- FDI, remittances, commodity prices, and aid. In each of these channels, the effect on Africa was particularly devastating." -- Shanta Devarajan, chief economist for the World Bank's Africa region

The United States

The recession appears to be ending and recovery could start as early as the fall, economists concur. But, the recovery, described variously as "a curved L," a "Q," and a "U" -- not a real "V" -- may be a hesitant one.

"Number one, we need a larger stimulus. That's not a popular thing to say and congress probably wouldn't approve such a thing. But the Fed has got to continue to pump a lot of money into the system. And we have to continue to run large deficits for a while." -- Robert Reich, professor at the University of California, Berkeley, and former U.S. secretary of labor

"The states are not, by their constitutions, allowed to run deficits. So they have to either cut services or raise taxes. Both moves slow the economy. The size of the shortfalls at the state and local level are staggering because revenues are down, while demands for public services are up, given the economy. So, the real challenge is: How can the administration help the states without going back to congress and seeking more stimulus? There may be ways for the federal government to absorb more Medicaid payments in the short term. Perhaps lending the states additional funds, perhaps helping with the states' bonding authorities. But all of that is probably not enough." -- RR

"Our biggest long-term problem, which we should address during this transition, is that we're going to have to export more to service the debt we've sold and are going to sell. Consumption growth has to slow down. We have to invest more to export more. That's the very opposite of what [the administration is] doing." -- Allan H. Meltzer, professor of political economy at Carnegie Mellon University

"Well, things are not getting better. They're just getting worse at a slower rate. I've dealt with journalists for many years, and they have a hard time distinguishing levels and rates of change. Distinguishing between first and second derivatives. That seems to be beyond their ability. They see the unemployment rate is falling less rapidly and they interpret that as a sign of recovery." -- AM

Western Europe

The recession, as in the United States, seems to be lifting overall, but the diversity of Western Europe's economies makes generalization hard. Countries with large stimulus plans, like Britain, will have shorter, lighter recessions. Exporters and countries with smaller stimulus plans, like Germany, might emerge later and face slower recovery.

"Europe, as a whole in some average sense is bottoming out. But there's less evidence of that than there is the United States. Clearly, there's a lot of differentiation there." -- Edwin Truman, senior fellow at the Peterson Institute of International Economics

"We're past the point of criticizing countries for not doing enough stimulus -- they don't need more stimulus at this point. Everything's pointing in the right direction. Assuming no further catastrophes, I think the question of stimulus is in the past now. One can have disagreements about how much more stimulus there should have been or how fast it should be removed. But we're on a second order of questions now.

"But, I think you can be critical, even if it's second- or third-order at this point. I think [Germany] should have done quite a bit more, and not been so stingy and free-riding on the rest of the world. But that's bygones. The recession will end and the economy will recover. The worst is largely behind us." -- ET

Eastern Europe and Russia

Emerging economies in Eastern Europe -- particularly those with high current-account deficits before the recession hit, like Latvia -- face an extremely difficult road. Their recession is not over, and recovery will be difficult. Growth will be depressed on a longer trajectory than in Western Europe. The region will likely require additional help from the International Monetary Fund. Political instability might well continue.

"We've seen clearly in this crisis that Russia is dominated by oil too much. It's as simple as that. [Among the BRIC economies], Russia is the weak one of the four. They have to diversify away from oil and improve their demographics. But, I think there are some modest examples of that developing. But if oil prices continue to rebound, [the government] needs to continue to address those fundamental problems." -- JO

"There will be problems down the road. I suspect that the IMF has not reached its peak in terms of lending and new programs, because of their role and the nature of the crisis. There will be countries that are affected by a lag in the recession in many parts of the world, and in Eastern Europe. Even today, you saw an opposition candidate in Bulgaria saying that they maybe Bulgaria needs to seek IMF stimulus." -- ET

On optimism about China: There is good news and bad news for China in our view, at the moment. The good news is that China, it's just about the only major economy that has continued to grow and continued to grow respectably. We just released an official new forecast [this week], a quarterly update, and we discussed the picture there. We feel that China is on course to grow something around 7 percent this year which we think is respectable, given the global climate -- the world outside China is going to shrink about 3 percent.

The World Bank is not all that optimistic, over two years. China is a large economy, but quite integrated in terms of trade and inward FDI. So, what has happened now is: exports are still the main drag on growth. They're very important for China, in terms of the importance of growth, more important than in India or Brazil. There are some people now who say China is continuing to grow -- exports are important and will continue to be mediocre. What's kept growth up is stimulus.

But you cannot undertake this large a stimulus for too many years in a row. Even China can't undertake a stimulus next year. In terms of momentum, when we look at next year, we don't really expect it to accelerate. It will grow respectably, but it doesn't meet -- there's anxiety here, there's this expectation that the economy will accelerate.

So, we have this massive pull from the government. But in our view, the conditions of the marketplace, the manufacturing sector especially, which is large and important -- China is facing the same problems as worldwide. Spare capacity puts downward pressure -- and so when you think about the appetite of firms in the market economy, their appetite for investment is not going to be that great.

So with exports also not expected to take off very impressively, we feel that one cannot expect really rapid growth.

On the engine of Chinese growth: Where is this growth coming from? It's coming from an impressive policy stimulus, a monetary stimulus. China was very fast in conceiving and implementing this policy, what everybody refers to as the "$4 trillion stimulus plan." It's about infrastructure spending and other projects that in China can fairly quickly be implemented, given their backlog.

On rapid expansion before the slowdown: China entered the crisis from a period of extremely rapid growth, when the government was trying to hold down growth by being tighter on the project-approval side, and with monetary policy. China still relies quite heavily on credit control. So doing the good years, those were tightly enforced. So when the crisis started to hit, the authorities took off the lid and the banks were then encouraged to lend. That fiscal and monetary stimulus is filtered to the economy -- quite rapidly and quite quickly.

On imports and experts: China entered 2009 with a very large current account surplus. On top of that, capital flows could be positive or negative. But it has this basic balance, which is the main driver of its foreign reserves accumulation.

When we look at what may happen, we think in terms of current account or trade balance -- its exports will do badly. Its imports have started to pick up in terms of policy stimulus. But import prices have fallen sharply because raw material prices have dropped. So China's terms of trade are improving. That is offsetting the impact on the real side.

Same thing on FDI -- we have weaker net FDI, but still significantly positive. The underlying forces will not stop functioning. They will moderate a little bit, now and over the next few quarters. But ultimately, they'll continue to accumulate.

On rebalancing: We at the World Bank and China's government is really working on rebalancing China's economy -- or, really, the way the economy grows over the next five, six, seven years. That rebalancing is towards a more domestic demand driven, service sector demand driven economy, with less inequality.

Now, progress with that rebalancing has not been very fast so far. But as the global crisis has intensified, senior Chinese policymakers have stated that the new global environment means that project is more important. The government is intensifying efforts to take care there.

What's happened since then? We've seen a lot of new spending. This massive infrastructure investment -- some foreign critics say that this will just add to its manufacturing capacity. But a lot of these investments are domestically oriented, household oriented: sewage systems, public transport, things like that. Not steel factories.

There have also been policies to boost consumption, often via subsidies. The government has really started giving subsidies to people in rural areas. And it's seemed to be successful.

Still, these policy changes are short-term. We still feel that there are important areas of structural policy that need to see more progress for China to convincingly rebalance the way that it will grow. These areas are really complicated ones -- they're on the agenda, and it's going to be a long-term project.

On growing China's service sector: It's important for countries to have a large middle class. The key for China is to make that happen in a way that doesn't stifle growth. In our view, China needs more service sector activity. And what kind? Basically, the whole range, from lowbrow to highbrow, really, across the board.

When we think about the service sector, on the one hand it could get a lot more productivity growth and economic growth by liberalizing and opening up to private participation in the service sectors that have been reserved for state owned enterprises. China could get a lot of bang for its buck by opening up sectors like the financial sector, transport, logistics, media. Media, of course, has a political connotation -- I mean, more like telecom. These are gigantic markets served by large enterprises, but not by competition. That's one area.

The other way in which it can see more activity is basically by changing the relative attractiveness of producing services versus products. What we mean by that is -- one of the reasons why China has been so successful in the last decade, is that it became really attractive for firms to build factories and churn out products. If all of your inputs are cheap -- land for free, if you don't care about the environment, if your water is cheap, your labor -- if all of that is cheap and the government is facilitating it, you'll come and stay with your factory. But the country subsidizing industrialists -- it's been too good at that.

The service sector has been underemphasized. These regulations tend to benefit the incumbent firms in incumbent industries. And they've been a constraint on growth in the service sector. So we feel by rebalancing that attractiveness -- by taking away some of the under-pricing of inputs into industry and removing these barriers around the service sector -- that's an important driver of this equilibrium.

On urbanization: This is the other major plank of reform you can expect to see in the next year or two. Hundreds of millions of people work as migrants in cities, keeping their families in the countryside and send money back. It would be better if China would create more thriving cities, where people can move with their families. Then, you get these virtuous circles: one person's spending is another person's income, right there.

When we do modeling exercises, we find that by removing some constraints China could get a lot of mileage in its service sector. What does that mean? Well, more restaurants, travel agencies, insurance agencies, whatever businesses people might want to open. More like the U.S. in China!

That means liberalization of some laws, though, and that takes time. China has a system of registration combined with entitlements. If you're registered as a rural person, you can't knock on the door of the urban government, even if you live there, and ask for public services. You're like an illegal immigrant. You can't have them. So, further liberalizations of the system will help. Along with land reform. But, again, we're talking on a much longer timeframe there. This can't happen overnight.

Land reform is really especially complicated. There are a lot of party members who are traditionally not in favor of land reform -- because it could lead to situations that other countries have had, which are unstable politically. On a big scale, China needs to work on getting rich parts of the government and rich areas to give things to poor areas. So, the strong central government moving prudently, that's really important there.

On the fear of asset bubbles: Well, China's capital account is not yet open. Not that some dollars, some financial capital doesn't somehow manage to get in. But it's very hard to move sums in and out without the government knowing. Some domestic economists pay a lot of attention to hot money inflows. But I don't think they're as large as people say they are. You can't have asset bubbles without them -- and so, that's not a concern at all right now.

Louis Kuijs is a senior economist for the World Bank in China. 

On the overall outlook: Basically, the African financial sectors were spared the initial round of bank failures and financial sector turmoil because African banks weren't that integrated and weren't dealing in derivatives and CDS and those sort of things. But when it turned into a real world economic crisis, when there was recession in developed countries, that immediately had a major impact on African countries on four main channels -- FDI, remittances, commodity prices, and aid. In each of these channels, the effect on Africa was particularly devastating.

On FDI: Private capital flows have been rising and had a peak of $53 billion in 2007, and now they're declining through no fault of the Africans. There are still profitable investments, but because the appetite for risk has gone down, the portfolio inflows have started reversing, with stock and FDI investments falling. For instance, the Democratic Republic of Congo is looking at a $1.8 billion dollar decline. The reason this is particularly bad is because financial capital had been seen as a sign that Africa might finally turn the corner. After twenty or thirty years of slow growth, it might be poised to take off. But those hopes have been deflated.

On remittances: They had risen to something like $20 billion. Normally you think of remittances as countercyclical -- things go bad at home, and people send more money. But, this is the first crisis that has started in the remittance-sending countries. 75 percent of remittances come from United States and Western Europe, the epicenter of the crisis. It's a very bad situation. Many people rely on those remittances for basic things -- food, medicine.

On foreign aid: This is also an unknown -- foreign aid is threatened. Even though the donors have committed to aid, we have to keep in mind that they committed it when the global economy was booming. There's been some analysis of Norway, Sweden, and Finland. They experienced a crisis in the mid-1990s and -- remember, these are particularly aid-friendly countries -- in all of those, foreign aid dipped by 10 or 12 percent. It took five years for aid to resume.

These are all compounding each other -- private capital, remittances, and foreign aid. It's a triple whammy.

On oil and commodity prices: There's been a big effect on primary commodity prices. Many countries who relied on exports, those prices have come crashing down. I was optimistic that this time around as opposed to during previous crises, oil exporters like Nigeria, Gabon and Angola had saved money from the price spike. They used a reference barrel price of $57 or $58 and saved the money beyond then. So that meant there was a cushion of reserves to withstand the hit. But, in a country like Angola, the non-oil sector is non-existent. The public sector relies on oil revenues. So, the situation is bad.

On countries unable to provide stimulus: There are some African countries that started with serious macroeconomic imbalances. Ethiopia, which is where I am now, had a 60 percent inflation rate in July of last year. It was related to food and fuel price crises. Ghana had a deficit of 14 percent of GDP last year. These countries have much less room to maneuver. They can only stimulate using funds provided by foreign governments, aid, organizations like the World Bank. The World Bank has been frontloading our allocations of aid to something like 15 countries so they can sustain a modest fiscal deficit.

On growth pessimism: Africa had been averaging 5 percent growth over the last 10 years, and for the last 3 was averaging 6 percent. Now, in 2009, the most recent forecast is 1.7. The IMF and the World Bank have been practicing competitive pessimism. I think in October the Fund projected 3.5 percent, and then we came in with 2.7 percent, and then the Fund came in with 1.8 percent. It's a major revision down.

On what less growth means: Of course, 1.7 percent growth still looks good by European standards or U.S. standards. But that kind of shortfall in growth in Africa has devastating consequences. In Europe, during a recession, you may lose your job or maybe even your house. But when the economy rebounds, you get your job back. But, in low-income Africa, when there's this much of a drop in growth, you have permanent consequences. Children get pulled out of school, which has lifelong effects on learning and earnings. More infants die before their first birthday. Growth decelerations actually lead to increases in infant mortality. That's the really scary thing.

On possible increases in investment: One concern that I have is -- suppose the global economy rebounds. Say it's a U rather than a V or an L. And say private capital flows resume globally. What that doesn't tell us is whether people are going to have a more permanent loss of appetite for risk. We don't know that, and it's going to have huge consequences here. What if investment doesn't return to Africa for some time?

Because, I would think that it would make sense for people to see stable African markets as a good place for portfolio diversification, for investment. These markets are less correlated to the big financial markets. But, that doesn't sound like what they're doing. There's been a flight to safety. I don't know. That's one concern I have. When will capital start flowing to Africa again?

On infrastructure problems: One of the reasons Africans are suffering is that the Africans weren't diversified. Many African countries still have an infrastructure deficit. And the business climate isn't good for new industries. So, African governments can use this opportunity to accelerate those reforms that will leave Africa both better poised to benefit from the global recovery but also better placed to withstand the next recession. Because it's going to happen. The issue is whether you can make these economies more resilient. It's bread and butter development, it's nothing fancy. But they've had trouble making inroads until now. If countries like Zambia and Cameroon had been able to develop a business structure that was more conductive to many industries, they wouldn't be so badly hit.

We shouldn't just focus on macro problems, let's focus on some of the microeconomic problems. The analogy is with the U.S. in the 1970s. Then, there was a major growth slowdown, with stagflation and oil price shocks and lots of other things. During that time, the government undertook the deregulation of infrastructure, and so in the rebound in the 1980s, productivity growth really took off.

In small ways, at least what I'm seeing is that some countries not hit with a major crisis -- Tanzania, Rwanda, Burkina Faso -- they're proceeding with the reform agenda.

Shanta Devarajan is the chief economist of the World Bank's Africa region.  

The backdrop to Japan's recession: Japan's recession started because of a sharp decline in Japanese exports. But, the decline of exports has slowed down and the manufacturing sector activity has declined sharply, as did imports, which has had a positive effect on GDP. Because of these factors, the negative growth has slowed down. That's why the Bank of Japan says we're near the bottom.

But we have huge potential production activity. Our GDP is much lower, 10 percent lower, than what we can produce. So, still our situation is very bad. The problem is, what will be the engine of recovery?

Japan's growth model: In the 1960s and ‘70s, Japan was like China. We had huge investment potential. When the economy was in bad shape, the BOJ cut interest rates, and we had huge private investment and economic growth increased. But in the 1980s and 1990s we had excess capacity, and huge numbers of workers retiring with a high saving rate. We had too much savings. Japanese demand was scarce, and the main engine came from abroad -- not from domestic factors. From this viewpoint, the recovery probably comes from abroad again.

The demographic concern: Japan's period of excess savings is almost over. The baby boomers born after WWII are now retiring and because they have no income and they need to consume, the savings rate must decline sharply over the next several years. So, we are now close to the exit of excess savings economy. And if that is correct, then domestic consumption will be the engine.

But, Japan has a big pension fund program. It's been hit by the recession. So, Japanese retirees aren't expecting a stable income. They can't consume a lot. Already, the demographic factors, the retirees, have helped bolster the Japanese economy. But it's not clear that they'll be a help through the end of the recession.

How this plays out depends on policy, whether the government boosts the confidence of consumers.

On Japan's exports: Japan mainly produces expensive consumer durable goods like automobiles and investment goods like machines for factories. Fiscal investment has declined all over the world, so Japan's exports -- machines -- sharply declined. And Japan's consumer goods, people do not purchase in this crisis. People aren't going to expensive shops to buy automobiles. The shift of demand from expensive consumer goods to daily cheap products has hurt Japan.

On China's importance to the Japanese economy: In the longer term, China's demand growth is very, very promising. But China is currently stimulating their economy through public investment, mainly public investment. That does not stimulate Japan's exports.

So, in the short term, although china is still keeping rapid economic growth, it is not very promising for Japan. In the longer term, China's middle income class is expanding rapidly and they will consume more and more -- in the long term, it's good news.

On U.S. policy response, versus Japan's lost decade: I think many scholars argue -- of course, we've already known that toxic assets and bad loans have very serious negative effect on the economy. The United States was quick compared with Japan to solve the issue. Japan took more than 10 years to address it. Obama's been more quick. That's very positive.

And the second issue is -- our credit problem was not so serious. I think more important factor was, in the case of Japan, excess saving. Investment opportunities were limited. [Economist Paul] Krugman has pointed out this issue. Japan had a fundamental problem of excess savings in the 1990s. So, not only deflation and bad loans, but also this problem -- the excess saving problem was the key. The U.S., I don't know its economy well. But it doesn't seem like that's a problem!

On the shape of recovery. I think U shaped, not V shaped! I hope it isn't L shaped! But it's going to take a long time. At least until the fall of next year, Japan's economy will be like this.

Kyoji Fukao is a professor at the Institute of Economic Research of Hitotsubashi University in Toyko. 

On whether the U.S. has hit the bottom: Well, things are not getting better. They're just getting worse at a slower rate. I've dealt with journalists for many years, and they have a hard time distinguishing levels and rates of change. Distinguishing between first and second derivatives -- that seems to be beyond their ability. They see the unemployment rate is falling less rapidly and they interpret that as a sign of recovery.

We'll have a mild recovery in the fall. Whether it starts September, November, December, who knows? The ability of economists to forecast is nowhere near that accurate. There will be a recovery.

On the administration's forecasts being too optimistic: The administration has a 3.5 percent growth rate. When the Reagan administration said that, journalists screamed about rosy scenarios. This is as rosy -- we have low consumer spending, a weak tax cut, and low productivity problems. We're going to subsidize to an enormous extent the purchase of electric power. Nobody ever got rich doing that. The cap and trade program is a tax on business, so we're not going to get a lot of growth from that. We're investing in things with low productivity growth and we're going to tax the people that make investments. That's not a recipe for growth. If people would just look at France or Germany, where they've practiced these policies -- they have very low growth.

What would you tell the Obama administration: I would tell them two main things: our biggest long term problem which we should address during this transition, is that we're going to have to export more to service debt we've sold and going to sell. Consumption growth has to slow down. We have to invest more to export more. That's the very opposite of what they're doing.

The second policy I'd recommend to them is to do two things at least to prevent a future crisis: get rid of Fannie Mae and Freddie Mac, and put the subsidy for housing on the budget. That's what a decent democratic government does. It doesn't hide them in corrupt and inefficient agencies.

On housing subsidies: The Republicans are just as much inclined to subsidize as the Democrats. They're both going to subsidize housing. And the Bush administration and Reagan administration going all the way back to Eisenhower, who was the most budget-conscious president we've ever had (he ran surpluses in three of his eight years) never thought about cutting back on housing programs.

On banking: Part of my concern about the future is: I would eliminate the idea of too big to fail. We don't want to continue a system in which the bankers make the profit and the public takes the losses. I don't see any reason we could decide we want that.

Creating a super-regulator is the wrong thing to do. Put the responsibility back on the banks. Who's going to know more about banking than bankers?

On the banking overhaul: I think it's a way to pander to the public and get them to believe that they're doing things in the public interest when they're not.

On the United States' borrowing costs: Many of us remember the 1980s, when we finally got around to ending inflation that we never should have let start. If we have another period of inflation like that it will be the same -- high unemployment, a falling dollar, and slow growth.

The administration people, they say, "Well, people who talk about inflation want us to do something now, but now we have to deal with unemployment." But there's just a huge amount of research on that. Two of my former colleagues say the optimal way to think about today is to think about what you have to do tomorrow, and work on all those problems at the same time. We need to stimulate the economy. We need to be concerned about inflation. We should be dealing with both things at the same time.

On the end of the recession: I think as long as we have the stimulus, we have we'll get recovery. The economy will start slowly recovering. It may have one strong quarter, but in the long term, we're looking at a slow growth pattern, with rising unemployment, for the next six months. Absolutely.

Allan H. Meltzer is a university professor of political economy at Carnegie Mellon University. 

On the recession being good to China: I think China's had an extremely good crisis. It's been good for China. It was very obvious to a few people, including some important policy people in Beijing, that the massive export growth of the past decade or so was just not sustainable on a permanent basis. It was heading for a collision anyhow. And in that case, something needed to change, so in some strange way, the crisis has been convenient. It's allowed them to take dramatic monetary and fiscal policy changes.

On forecasting BRIC growth: It hasn't really changed it much at all. From when we first looked at it in 2003, the timetable that we laid out is, broadly speaking, happening in line with what we said. China overtook Germany last year, exactly when we said it. And they're all set to overtake Japan in the next two years, possibly even this year, which is actually quicker. The other three (Brazil, India, and Russia) are emerging, broadly speaking, as we suggested, and so very little has changed.

What we do see today is that the likelihood that the BRICs will take over in aggregate from the G7 10 years earlier, because China and India have grown a bit more than expected.

How do BRICs emerge?: It's complex and that's part of the fascination. Being big isn't the same as being as wealthy. Even though China's overtaken Germany, obviously it's nowhere near as wealthy as Germany and it's not going to be.

Are we at the end of the global recession?: I'm a believer in it, broadly speaking. Although some of the latest evidence is slightly disappointing.

What effect does the rise of China have on other emerging markets?: It's very important. It's demonstrating to the big-population emerging countries that there's an alternative model to the United States, to engage with the world economy. Nigeria and Vietnam are good examples of this. And Indonesia is as well.

It means that you can engage with the world economy, with the same social structure you had before. Before China's success of the last decade, many people feared that the only way you could become successful, the most simple way, was to copy the United States. That's clearly not been the case.

What does the Chinese government need to do differently? I don't know. I give them a 9 out of 10. As with the Asian crisis, when they get hit with something from the outside, the thing that impresses me so much about China is they have something in the cupboard, they take it out and there's the response.

Big risks?: Social disruption. If the big concern there is that at some stage, at some level of wealth, Chinese people might want to control every decision for themselves, including how many children they have. That's a big economic risk.

What if the world economy double-dips?: Because of the Chinese policy response -- it's interesting. They're mitigating the risk of the double-dip, the Chinese and to a lesser extent the Indians. When I hear questions like that, it's a question that assumes the world is Anglo-Saxon driven, which it isn't any more. A double dip with the power of the Lehman failure would upset things. But a slowdown in the U.S. would have a very marginal effect. Because they've come up with the policy response. They've dealt with it. China and Indi represent one third of the world's population. I think it's almost arrogant, certainly presumptuous, to presume that they won't be ready for global economic changes.

On Russia: In this crisis, it's been clear that Russia is dominated by oil too much. It's as simple as that. Russia is the weak one of the four. The government has to diversify away from oil and improve their demographics. But I think there are some modest examples of that developing.

Jim O'Neill is the head of global economic research for Goldman Sachs.

On the end of the recession: I think we're approaching the bottom. It's getting worse more slowly. I suppose one could take some encouragement from that. But you'd be wise unwise to take too much. The fundamentals are still out of whack. Americans are still deep in debt. Mortgage foreclosures are soaring. Housing prices continue to drop. Job losses are mounting. And the banks are still sitting on a mountain of non-performing loans.

On the shape of recovery: If there were a letter somewhere between U and L, maybe Q, I'd choose it. It won't be a vigorous recovery, because consumers don't have the money to make it a vigorous recovery. They can't borrow, they're homes are worth substantially less than before. And many are still worried about keeping their jobs. Consumers account for 70 percent of economic activity. Exports will not get us out of this mess, because the global market is in the doldrums. Businesses will not step up investment beyond replacing inventories if there aren't customers out there to buy their goods and services.

Beyond all this is the persistence of gross imbalances in the global economy. China, Japan, and the oil producers will not continue to lend money to Americans. So, almost inevitably, the dollar will resume its long-term decline. That means everything we buy from the rest of the world will cost more. Eventually, domestic demand in China and India and Japan could help enliven U.S. export markets and generate new employment that way. But we may have to wait years for this to happen.

On unemployment: High unemployment will remain with us for some time. Employment tends to be a lagging indicator, because employers are reluctant to hire until they know that there are enough customers out there. I wouldn't be surprised if the official rate of unemployment hit double-digits by the end of this year, and reached 11 or 12 percent next year. That doesn't even include the many millions who are too discouraged who are working part time who would rather be full time. Or who are too afraid to enter the labor market. And hours worked is declining too.

On what the Obama administration needs to do: Number one, we need a larger stimulus. That's not a popular thing to say and congress probably wouldn't approve such a thing. But the [Federal Reserve] has got to continue to pump a lot of money into the system. And we have to continue to run large deficits for a while.

Number two, the Obama administration does need to pass healthcare, universal healthcare. That will help average Americans balance their checkbooks. It's the single fastest growing item of consumer expenditure. It has reduced real wages. And it is responsible for gigantic deficits, government deficit.

On what might cause a double-dip: State and local deficits are resulting in major service cut-backs and tax increases at the state and local levels. The result is a gigantic fiscal drag, in the range of $350 billion over the next two years. That offsets more than half of the Obama stimulus.

Ideally the administration should move to offset those state shortfalls. Or, at least give the states time to deal with them, some breathing room. The states are not, by their constitutions, allowed to run deficits. So they have to either cut services or raise taxes. Both moves slow the economy. The size of the shortfalls at the state and local level are staggering because revenues are down while demands for public services are up, given the economy. So, the real challenge is: how can the administration help the states without going back to congress and seeking more stimulus? There may be ways for the federal government to absorb more Medicaid payments in the short term. Perhaps lending the states additional funds, perhaps helping with the states' bonding authorities. But all of that is probably not enough.

Right now we've got shortfalls in half of the states, and that will soon be up to 60 percent. Most of the worst-hit states are very populous and most of them have large populations of immigrants and poor as well as lower middle class. Will there be a tipping point at which enough states are in trouble that congress comes to their rescue? Possibly.

But before that happens, the fiscal drag could be so large as to seriously harm any recovery. Republicans are making such a big deal about deficits right now -- as they always do -- that the public is growing concerned about deficit spending. That's frankly absurd, given that the government is acting as the spender of last resort here. But, politics is politics.

On deficits: It is easy for demagogues to get the public upset about government deficits. Ross Perot did it in 1992. The Republicans who spent more under former President George W. Bush than any administration has spent over eight years apart from World War II have suddenly become aware of deficits, when they're responsible, when Bush is responsible, for most of the current one. Nonetheless, if you say the same thing over and over again, people start believing it. And unfortunately, the Republicans' message is beginning to get through, although notwithstanding that it's completely, completely false.

On health care: Remember -- the Republicans have been successful since Harry Truman was in the White House in using healthcare as a weapon -- using the democratic health care plans as a weapon -- to frighten the public and win back midterm elections. They did this in 1950, they did it as recently as 1994. They're going to try to do it in 2010.

On why this isn't a normal recession: This is an unusually deep recession and it's caused by an asset bubble popping. This is not the normal recession caused by the Fed overshooting. So recovery here is going to be very gradual. It's going to depend on consumers slowly building up enough cash to feel comfortable spending again. Businesses slowly building their inventories to the point they need to rehire. And government maintaining enough deficit spending to pick up the slack.

On what the recession looks like: I expect that we'll see a bit of a recovery next year. But it will be very slow and tepid. There will be Wall Street rallies along the way, just as there were earlier this week and late last week, as investors try to outguess each other and climb on any bandwagon they can find. But the stock market is not going to really catch fire. In fact I don't think we're going to see any long-term rally or bull market for perhaps three years. I don't expect a sustainable bull market for years.

It's impossible for the economy to have a strong recovery unless consumers have more money in their pockets. And I don't see where that money is going to come from.

Robert Reich, a former U.S. secretary of labor, is a professor of public policy at the Goldman School at the University of California, Berkeley.

On the U.S. bottoming out: It does appear that the U.S. economy as a whole is bottoming out, in the sense that six or eight months from now, sometime in the second quarter, economists will say -- that was the bottom of the recession, the trough. But, it's not the same thing as saying that we're going to have a rapid recovery and many sectors of the economy will pick up.

On the shape of the recession: Well, there's going to be some dimension of V here. Because a major feature of the recession has been a big inventory drawdown and that inventory drawdown comes to an end and that's automatically a big plus, in terms of arithmetic. So you may well get some bounce. I think the real issue is not so much what happens over the next quarter, but the next six quarters look like. The conventional view that the next six quarters will be weaker than average is sensible, because of the continuing problems with the financial system as well as the fact that we're involved in a global downturn.

It's likely, for example, that in contrast to the last recession there will be no rapid rebound in housing construction. The fact that you have generated a deep downturn means investment will bounce back less quickly. Put all those things together, it's a good case for a slower than average recovery and subsequent expansion.

On bad factors vs. ones that could reverse expansion: I was concerned a year ago that regulatory actions would impede -- would be a factor in exacerbating the downturn, in that sense pro-cyclical. I think we're now at the point, nine or twelve months later, that enough of this stuff is inevitable or obvious and financial institutions are already adjusting to a new regulatory environment. It's more of a debater's point, now.

I think at this point, in some sense, the weak financial system may be one factor making the expansion slower than usual. But it's no longer going to throw the economy into reverse. That's quite different than when it was going down.

I think the notion that you're going to have an oil spike, or that the rise in long term interest rates is going to choke off recovery -- there's no recovery that's been stopped by a hike in long-term interests rates. Oil is associated with recession, but that's not quite the same thing as saying that rising commodity prices -- a demand phenomenon -- will stop the recovery.

Once things get going there will be continued expansion. The question is, how much that expansion will be depressed.

On Western European stimulus: We're past the point of criticizing countries for not doing enough stimulus -- they don't need more stimulus at this point. Everything's pointing in the right direction. Assuming no further catastrophes, I think the question of stimulus is in the past now. One can have disagreements about how much more stimulus there should have been or how fast it should be removed. But we're on a second order of questions now.

But, I think you can be critical, even if it's second- or third-order at this point. I think [Germany] should have done quite a bit more, and not been so stingy and free-riding on the rest of the world. But that's bygones. The recession will end and the economy will recover. The worst is largely behind us.

On the IMF: There will be problems down the road. I suspect that the IMF has not reached its peak in terms of lending and new programs, because of their role and the nature of the crisis. There will be countries that are affected by a lag in the recession in many parts of the world, and in Eastern Europe. Even today, you saw an opposition candidate in Bulgaria saying that they maybe Bulgaria needs to seek IMF stimulus.

On worrying: I'm a former central banker. Everything keeps me up at night. But no specific, single worry.

Edwin Truman is a senior fellow at the Peterson Institute for International Economics.