Three years after the global economy s near collapse, the feeble recovery has already petered out in most developed countries, whose economic inertia will drag down the rest. Pundits decry a double dip recession, but in some countries the first dip never ended Greek GDP has been dipping for three years.

In Vietnam, inflation has hovered near 20 or more, with the government seemingly unwilling to embrace deeper reforms. Thailand s interminable political imbroglio has left its economy at stall speed the reformist zeal of Indonesian President Susilo Bambang Yudhoyono has petered out in his second term following the departure of Finance Minister Sri Mulyani Indrawati and Japan seems to remain in a state of suspended animation.

After slowing its dam building program in response to the serious environmental consequences of completion in 2006 of the Three Gorges Dam the world s largest China is now rushing to build a new generation of giant dams. At a time when dam building has largely petered out in the West and run into growing grassroots opposition in other democracies like Japan and India China will remain the nucleus of the world s mega dam projects.

To me, this view of things explains much better than the orthodox account why, for all the money pumping by central banks, commercial banks have not started lending again, and the economic recovery has petered out. Just as lenders did not force money on the public before the crisis, so now they cannot force heavily indebted households to borrow, or businesses to seek loans to expand production when markets are flat or shrinking.