After weeks of relentless decline in asset markets, during which credit markets resisted all official efforts to unblock them, the world's major central banks finally got together last week and injected an unprecedented amount of money into the global economy.

The reaction was instant. Despair gave way to euphoria, as the planet's major stock markets rallied to record gains. Metaphors of driving off cliffs and stuffing money under mattresses yielded to audible sighs of relief. The business press judged that finally, finally, the beast of impending Depression had been tamed.

Before long, though, the declines resumed. Although lending rates on short-term credit began moving downwards, a sign that confidence was returning to the global banking sector, bond yields remained elevated, and stock markets slid again.

The process was more orderly, less panicked than before. Still, once traders finished celebrating the end of the storm, they woke up to see the carnage in their yards. Depression, most now agreed, had been averted. But nothing any central bank or government could do could prevent the world economy heading into a recession - possibly the worst since the Great Depression.

Individual debt loads

What might that mean? Just as in Jamaica, some of us had grown fat in recent years off miracle investment schemes, only to lose everything; so too consumers in the major industrial countries opened their eyes to the realisation that their 'good times' had been largely borrowed. In the US and Britain, individual debt loads stand at record levels. Everyone knew it couldn't last, but everyone put off the day of reckoning.

Now that it has come, consumers in rich countries will be saving more and paying off debts. That, along with the expected rise in unemployment, will reduce consumption. The major industrial economies will slow, and some will sink into recession. The rebound might be years off.

However, that doesn't mean all the world's economies will go into recession. Asia will remain strong, and current forecasts are that the healthy growth rates seen in Africa of late will remain. Canada may avoid outright recession, as may continental Europe.

Nevertheless, everywhere, growth rates will slow. So for a small island economy like Jamaica, heavily dependent upon trade, the seas will get rougher. There is no room for complacency or hoping for the best. Tough decisions must be taken. They will probably be practical only if they emerge from a national consensus.

Challenges

However, with eyes firmly fixed on the challenges ahead, all need not be lost. Indeed, looking back to the last global slowdown of the 1970s, we know it is possible for a small economy to position itself for growth with the right set of policy choices. But doing so means putting off until tomorrow some of the things we might want to do today.

At an individual level, those who have spent the last few years living by the prudent lessons they learned from their forebears - saving for a rainy day, using education to get ahead, postponing unnecessary purchases - might find their thrift rewarded.

They will be able to weather the storm, and may even profit from falling prices as they step in to make those awaited purchases.

So it will go for nations. There is opportunity in crisis, as we always hear. Grabbing it will require that willingness to make the needed sacrifices. Trying to avoid the pain may, on the other hand, only deepen and prolong it.

However, ensuring that the sacrifice is shared broadly - that some are not called upon to forego for the benefit of others - is likely to be the way a country must find its way towards a brighter future.

John Rapley is president of Caribbean Policy Research Institute (CaPRI), an independent think tank affiliated to the UWI, Mona. Feedback may be sent to columns@gleanerjm.com.