Ten years on, the most important economic indices are pointing upwards. Those numbers are misleading: The wounds of the financial crisis still have not healed, and they won’t do so very soon.
It’s not your typical anniversary, because there is nothing to be celebrated nor commemorated. Instead, the tenth anniversary of the start of the global financial crisis should allow for a moment of reflection about what went so terribly wrong. Yet, optimism seems to prevail among policymakers and the public alike. Against the backdrop of fairly positive developments in trade volumes, employment figures and consumption behaviour, the world economy has finally returned to sustainable growth, or so it seems.
That is good news for financial clerks who are currently celebrating record heights at the stock exchanges around the world. It’s also great news for politicians who get re-elected on promising economic data. But everyone else should be wary of the celebratory mood.
MORE THAN A LOST DECADE
Consider the numbers: Italy’s statistical office ISTAT announced earlier this week that the major national industries are back on track. Consumption has increased, as have industrial production and employment. However, being back on track is not the same as being on target. At the onset of the turmoil in 2007, unemployment numbers ranged around 6%, it’s 12% now. Among Italian youth, it’s 20% pre-crisis compared to 38% in 2016.
Similar unemployment trends can also be observed in countries such as Australia, Canada, Portugal, Switzerland, Denmark, the list is endless. In fact, in most European countries the recovery has been painstakingly slow, data by the World Bank reveals. After 10 years, levels which were considered the new normal in 2007 are not even in close reach. Healthy economies which deliver for their citizens look different.
Yes, the figures point upwards, but as long as we have not bounced back to pre-crisis standards, we cannot seriously claim that the crisis is over. The financial meltdown has hit global economies hard, and the bruises are still visible and painful.
BACK TO THE FUTURE
Optimists like to look ahead, especially when the past was a crucifying experience such as the years following 2007. If we want to take a lesson from the financial (and social as well as political) meltdown, however, looking back offers many insights that might become helpful in the years to come.
Instead of regarding the current upward trend as joyous economic development across countries and industries, we should look back at 2007 like a college student looks at his bank account after a night out. Not in disbelief, but in the firm belief to change habits: Save more money in advance, don’t get captured by everyone else’s euphoria and consume more than one can bear, or use physical cash reserves instead of the card. This spares both students and economies a heavy hangover.
The next crisis will come upon us sooner than we might prefer. Prudence and regulation can start immediately. With a US president who plans to dismantle rules and restrictions for banks, they might be more urgent than ever.
Perhaps most importantly, let us not pretend we are prepared for the next crisis, please. As we should have learnt over the past ten years, such ignorance costs dearly.