Historical background of Global Economic Crisis
The new world crisis began with the collapse of the credit pyramid in the US, the consumer centre of the planet (the US accounts for as much as 40 per cent of global consumption). On incomes which had been shrinking since the early 1980s, the American masses were no longer able to acquire the previous quantity of goods. The US population was also unable to pay for even the cheapest credits. Analogous problems appeared in Great Britain and elsewhere in the European Union. A new crisis had opened up in the global economy, signifying that one big economic wave was being replaced by another. The world economy could not continue developing in the old fashion. Throughout the entire period from 1975 to 2008, corporations and states had deliberately sought to reduce the cost of labour power. Companies transferred production to the Third World, causing the terms of employment in the first to deteriorate. For more than thirty years hourly wages did not increase, while the length of the working week grew. Following the crisis of 2001, states increased their emissions. The European Union put 500 euro banknotes into circulation, and in Russia 5000 ruble notes were issued. The most active policy of emissions was in the US. During the last declining wave, the doctrine of cheap labour power had held sway in the business world. It was considered that the competitiveness of enterprises and of national economies depended directly on the size of wages and the cheapness of national currencies. The lower these indices, it was argued, the more efficient the economy. But when currencies were undergoing global devaluation, the fall in the price of labour power entered into contradiction with the consumer function which this price played. Because of the crisis, the cheapening of labour power that was occurring in the world economy had become uncontrolled, and the production of goods in the earlier quantities and at the previous technical level had been rendered loss-making. If this contradiction were to be resolved, a leap in the productivity of labour was required, signifying a technical revolution in industry. On January 22, 2007 the stock exchanges were shaken by the first slump, followed by a series of new collapses. The world’s share markets were destabilised. Inflation accelerated, with food prices beginning to rise sharply. A number of American and European banks announced colossal losses in their results for 2007. The scale of the economic problems in the US became evident. A new world crisis had begun. The emergence of its first symptoms provoked numerous questions concerning the nature of the crisis, the reasons behind it, and the logic shaping its probable development. The Great Financial Crisis and the Great Recession began in the United States in 2007 and quickly spread across the globe, marking what appears to be a turning point in world history. Although this was followed within two years by a recovery phase, the world economy five years after the onset of the crisis is still in the doldrums. Robert E. Hall, then president of the American Economic Association (AEA), provided a different approach in an address to the AEA in January 2011, entitled “The Long Slump.” A “slump,” as Hall defined it, is the period of above-normal unemployment that begins with a sharp contraction of the economy and lasts until normal employment has been restored. The “worst slump in US history,” Hall stated, was “the Great Depression in which the economy contracted from 1929 to 1933 and failed to return to normal until the buildup for World War II.” Hall labeled the period of prolonged slow growth in which the U.S. economy is now trapped “The Great Slump.” With government seemingly unable to provide the economy with the needed stimulus, he observed, there was no visible way out: “The slump may last many years.” In June 2010, Paul Krugman wrote that the advanced economies were currently caught in...
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