Introduction:
It
is now around 7 years since the initial events around the current
depression began, with the housing market having peaked in July 2006
in the United States, followed by the collapse of the US subprime
mortgage industry by March 2007. The house of banking cards gradually
fell in, reaching its depth with the Lehman bankruptcy in October
2008. Japan, of course, has remained in its own downturn since 1989,
when their stock exchange declined over time to one quarter of its
peak in 1989. The whole period from 1989 to March 2000 was marked by
a high level of instability, with a downturn to 1993 followed by an
upturn which led to a flow of money to East Asia which fled in 1997
precipitating an East Asian crisis, and then a dot com boom and
collapse in March 2000. The combination of 9/11 and the war on Iraq
drew the global economy out of its slump, albeit with a low rate of
growth.
From
a perspective in which we look back from 2014, the turning point
appears to be around 1989, when there was a downturn in Western
economies following the stock exchange crash of October 1987. Japan
has even now to recover to a period of consistent economic growth,
while Sweden and Canada went through major transformations. . It is
no coincidence that the end of the Cold War was in 1989-91, during
that global downturn. The entire period from 1940-90 was lived in the
shadow of war and Cold War. Without the political and economic
stability that it induced in ‘Western capitalism’, the future
became uncertain. The next ten years saw a series of bubbles- in East
Asia, with the implosion of the Long-term capital management fund,
and the end of the dot-come boom in March 2000.
