The Global Financial Crisis and Its Widespread Effects
7
Chapter
The Global Financial Crisis
The global financial crisis had widespread effects. Out of work like many, marketing executive Chuck Bridges 138 wears a variation of the “will work for food” sign.
M07_PAYN4592_04_SE_C07.indd 138
06/01/12 6:11 PM
Chapter 7
The Global Financial Crisis
139
IntroduCtIon
Financial crises and accompanying economic recessions have occurred throughout history. Periodic crises appear to be part of financial systems of dominant or global powers. The United States is the epicenter of the current financial crisis. Enjoying a unipolar moment following the collapse of the Soviet Union and the failure of Communism, the United States was confident that economic liberalization and the proliferation of computer and communications technologies would contribute to ever-increasing global economic growth and prosperity. Globalization contributed to the extraordinary accumulation of wealth by a relatively few individuals and created greater inequality. In an effort to reduce inequality in the United States, the government implemented policies that engendered the financial crisis. As we discussed in Chapter 1, finance is usually the leading force in the growth of globalization. The rise of great powers is inextricably linked to access to investments and their ability to function as leading financial centers, as we saw in Chapter 2. Their decline is also closely linked to financial problems. Finance enables entrepreneurs to start various enterprises and to become competitors of established companies. It is also essential to innovation and scientific discoveries. Finance also facilitates risk sharing and provides insurance for risk takers. Countries that have large financial sectors tend to grow faster, their inhabitants are generally richer, and there are more opportunities. Financial globalization contributed to the unprecedented growth and prosperity around the world. China and India became significant economic
Chapter
The Global Financial Crisis
The global financial crisis had widespread effects. Out of work like many, marketing executive Chuck Bridges 138 wears a variation of the “will work for food” sign.
M07_PAYN4592_04_SE_C07.indd 138
06/01/12 6:11 PM
Chapter 7
The Global Financial Crisis
139
IntroduCtIon
Financial crises and accompanying economic recessions have occurred throughout history. Periodic crises appear to be part of financial systems of dominant or global powers. The United States is the epicenter of the current financial crisis. Enjoying a unipolar moment following the collapse of the Soviet Union and the failure of Communism, the United States was confident that economic liberalization and the proliferation of computer and communications technologies would contribute to ever-increasing global economic growth and prosperity. Globalization contributed to the extraordinary accumulation of wealth by a relatively few individuals and created greater inequality. In an effort to reduce inequality in the United States, the government implemented policies that engendered the financial crisis. As we discussed in Chapter 1, finance is usually the leading force in the growth of globalization. The rise of great powers is inextricably linked to access to investments and their ability to function as leading financial centers, as we saw in Chapter 2. Their decline is also closely linked to financial problems. Finance enables entrepreneurs to start various enterprises and to become competitors of established companies. It is also essential to innovation and scientific discoveries. Finance also facilitates risk sharing and provides insurance for risk takers. Countries that have large financial sectors tend to grow faster, their inhabitants are generally richer, and there are more opportunities. Financial globalization contributed to the unprecedented growth and prosperity around the world. China and India became significant economic