A New World Order? The Aftermath of the Financial Crisis
| Author | Andrew Gamble |
| Published date | 01 April 2010 |
| DOI | 10.1111/j.2041-9066.2010.00008.x |
| Date | 01 April 2010 |
| Subject Matter | Feature |
a once-in-a-century event. This crisis
was certainly different in scale from
other recent fi nancial crises, such as
the bursting of the dotcom bubble in
2000 or the Asian fi nancial crash in
1997, but there has been disagree-
ment among commentators over
whether the worst is now over, or is
still to come.
By the end of 2009 signs of recov-
ery were visible: markets were im-
proving and bankers’ bonuses were
on the rise again. Unemployment is
expected to peak in many countries,
including the UK, during 2010. But
there are fears of aftershocks from
the great fi nancial earthquake of
2008. Confi dence is still brittle, and
the cost of the fi nancial bail-outs
and stimulus packages has been very
high. In many countries the banking
crisis has begotten a fi scal crisis, and
in some of the worst affected states
this fi scal crisis has threatened to be-
come a sovereign debt crisis as well.
Fears of a new fi nancial collapse,
leading to a double-dip recession, re-
main strong, particularly since many
of the features of the international
political economy that gave rise to
the crisis in the fi rst place have not
been addressed. Guaranteed interna-
tional agreements on reform of the
global fi nancial architecture have yet
to be secured. Disaster was staved off
at the end of 2008, but it is not yet
clear that the groundwork has been
laid for a sustained recovery.
A New World Order?
The Aftermath of the
Financial Crisis
The crash of 2008 is already
recognised as one of the larg-
est fi nancial crises to have hit
the international capitalist economy
in the last hundred years. The only
two comparable events are the Great
Crash in 1929–32, which led to the
Great Depression and the fi nal col-
lapse of the old liberal international
economy in the 1930s, and the Great
Stagfl ation of the 1970s, which also
precipitated a lengthy period of eco-
nomic restructuring and intensifi ed
political and social confl ict.
What is not yet clear is the scale of
the political and social changes that
are likely to ensue from the 2008
crash. One immediate effect of the
crisis in the fi nancial markets was
a deep recession that has affected
many, though by no means all,
parts of the international economy.
This downturn brought an end to a
long period of sustained growth, but
the swift action of the authorities
in both North America and Europe
has, thus far, succeeded in offsetting
the threat of recession turning into a
depression and a major defl ation of
the kind experienced in the 1930s.
2009 witnessed a gradual return to
normality, and the fi rst signs that
some of the leading economies were
coming out of recession. But confi -
dence remains fragile.
Alan Greenspan, the former
chairman of the Federal Reserve,
described the 2008 fi nancial crash as
The financial crash of 2008 rocked the foundations of the global economy. Banks went bust,
many countries almost followed suit. But just how big was the crisis? And what will its long-
term effects be? Andrew Gamble takes a look at the worldwide implications of the credit
crunch.
How Big was this Crisis?
The magnitude of the crisis can be
measured in a number of ways.
There is fi rstly the scale of the events
themselves, particularly the number
of major fi nancial institutions that
got into diffi culties. This was not
an isolated bank or even a group of
banks; it was all the major players.
The crisis struck in the heartlands
of the fi nancial system, not on its
periphery, and it had ripple effects
which meant that no state or region
was entirely immune.
A second indicator is the response
of governments. There was a bliz-
zard of initiatives, which included
bail-outs, nationalisations, fiscal
stimulus packages, zero interest rates
and quantitative easing. Neo-liberal
orthodoxies were cast aside, and the
state returned with a bang. As in
previous crises there were dramatic
interventions and policy innova-
tions. The pressure of events forced
responses that would have been dis-
missed as unthinkable a short time
before. Doubtless Hank Paulson, the
US treasury secretary and a former
chairman of Goldman Sachs, would
never have expected to stand up
and announce the nationalisation of
some of the United States’ leading
fi nancial institutions.
As with previous crises of the in-
ternational political economy, this
crisis has some common, interna-
Alan
Greenspan,
former
chairman of
the Federal
Reserve,
described the
nancial crisis
as a once-in-a-
century event
17April 2010
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