The 2008 crisis is not over yet
Distrust of a rule-based order is endangering economic recovery
On September 15, 2008, Lehman Brothers, a Wall Street giant, filed for bankruptcy in the United States. This was to become the starting point of the biggest economic crisis the global economy had seen since the Great Depression of the 1930s. Although the crisis started from sub-prime lending in the US, its effects were felt across the world. Global GDP growth declined sharply. Millions of jobs were lost. Countries which were dependent on export markets, especially in advanced countries, were among the worst sufferers. While economic activity has recovered since then, especially in terms of headline growth numbers, things are not the same any more. The biggest change after the crisis has been the gradual weakening of the consensus on globalisation being an unambiguous blessing.
What is ironical is the fact that the backlash against globalisation has left the traditional opponents of free market capitalism, the left, even more worried. This is because the popular mobilisation has happened behind right of centre political leaders like Donald Trump and demands like Brexit. There is undoubtedly a lot of truth in the claim made by this kind of politics that globalisation has created more losers than winners even in advanced countries. But there are other aspects to this kind of politics which can fan retrograde beliefs and practices both in the social and economic realm. The liberal counter to such politics is often seen as being representative of entrenched vested interests which benefitted from the old economic order.
The ascendancy of such politics, which also entails a breakdown of rule-based and meaningful economic cooperation in the world, can endanger a sustained economic recovery. This can set off a vicious cycle in which a future economic reversal generates more support for retrograde policies in the name of populism, which will further derail a coordinated economic recovery. Ten years after the crisis erupted, three words can be used to describe the situation today: it’s not over.