The UK Children’s and Schools secretary Ed Balls, has warned that the world is facing its worst recession in over a century, surpassing even the Great Depression of the 1930s.
This is the darkest prediction yet made by a government minisiter, stating that the recession today will still be felt 15 years from now.
Balls is a close ally of Prime Minister Gordon Brown, predicts a resurgence in far-right groups (as there was during the Great Depression) as well as other “seismic events” that will completely “change the political landscape”.
“I think this is a financial crisis more extreme and more serious than that of the 1930s and we all remember how the politics of that era were shaped by the economy.”
The comments have raised eybrows and created turmoil in the UK’s political arena, with several politicians playing down Ball’s comments and others asking for clarification.
A spokesman for Mr Balls insisted that the Prime Minister and Chancellor Alistair Darling had highlighted the “unprecedented speed and ferocity” of the crisis “time and time again”.
“The unprecedented global nature of this crisis and its impact on the global financial sector is affecting every single economy in the world,” the spokesman said.
One can begin to wonder: Why is Balls making this statement? Why is such a close ally of Gordon Brown making this statement? Is it a political game? Is it an exxageration or a warning? Who’s next in the global political arena to confirm such statement or make similar ones? Only time will tell.
Image by kwl under Creative Commons.
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An overview of the crisis:
1. While it is difficult to predict events with any certainty, there is no reason to expect that the current crisis will pass quickly, and there is no quick way out of this crisis. It is difficult to predict the true extent of economic decline. We are at the beginning phase of the crisis, indeed as crisis progressed through its phases, the situation automatically gets worse. The most severe consequences of the crisis are still ahead of us.
2. The historic meltdown of the global capital markets, and sharp economic downturn, is systemic in nature, and is conditioned by the contradictions, and vulnerabilities, of the current level of economic organisation, with the world economy unable to develop further in the old manner.
3. The global systemic crisis, which itself has built up over decades, will not be overcome until the vulnerabilities/ and contradictions that caused it are resolved effectively.
4. While the crisis is being felt more acutely in some regions, it is a global systemic crisis. The initial epicenter of the crisis was in the United States, but the crisis is a world crisis which will be affecting the whole world system and will be increasingly disrupting the production process. The crisis is felt much stronger in the USA, and also in countries which are heavily integrated within the US economic and strategic sphere. The crisis is global in nature, and will affect all countries that are part of the world economy, but not necessarily at the same time and to the same extent. How and when it will affect each country may vary. The specific impact of the crisis for each country – collapse of several large international banks, corporate collapses and industrial shutdowns – will occur unevenly and at different times in various countries.
5. The crisis will produce a handful of winners and help to reinforce global powerful monopolies or oligopolies controlling nearly all production, commerce and finance in the world economy. The importance of medium and small-size business will decline still further. The world economy will become increasingly monopolised, and there will be numerous corporate takeovers. Most small-size enterprises will be unable to survive.
6. As a result of the deepening of the global economic crisis, social inequality will increase, but inequality of incomes between workers in the developed economies and the emerging economies will lessen.
7. After contracting during the crisis, energy consumption will resume its growth. The global revival will need cheap energy, produced in greater quantities than before. The reliance on hydrocarbons, however, will probably decline markedly, simply because the amount of remaining oil resources will not be sufficient. Therefore, it is logical to expect that under the impact of the crisis there may be greater emphasis on development of alternative fuels and to promote investment in efficiency and clean energy, and eventually some major breakthroughs in this area.
8. There are already indications that the crisis will possibly encourage rising global protectionism, more internally centered economic growth in the emerging economies, and a backlash against globalization. The crisis will also cause a reordering of the economic pecking order in the emerging markets. Those countries without a large domestic savings base, or with substantial balance-of-payments deficits, or with low foreign exchange reserves, are likely to suffer, while countries with huge savings and foreign exchange reserves (in particular China, Russia and Brazil) will increase their influence in the global economy substantially.
9. Through the current crisis we will witness the rebalancing of world economic growth further away from the USA (and UK) towards the emerging economies of Asia and elsewhere, especially China. The depth and severity of the current crisis are likely to signal major global political economy changes that will result in such a major geopolitical shift. It seems quite likely that the crisis will spark some unforeseen geopolitical readjustments.
10. A likely outcome of the crisis, particularly of the breakdown of the global monetary system, will be a severely declining role of the US dollar (as global reserve currency) in the global financial and trade system, which will be replaced by a basket of world’s main currencies.
11. As a result of the serious collapse in global markets, and also because of the relative strength of their banking sector, it is quite possible that the emerging economies will increasingly shape the future of global finance just as they are already shaping the direction of global trade.
12. How Deep and for How Long? The likely time frame for the development of the crisis is as follows: the economic decline (stagflation) is likely to be most severe (severe decline) during the period 2009 and 2010, depression and restructuring from 2010 to 2013. From 2011, the situation will start stabilizing again and improving a little in some regions of the world, i.e. Asia and perhaps the Eurozone, as well as in countries producing energy, mineral and food commodities.
13. The crisis is destined to bring about fundamental changes in the world economic system. The world will be different when the carnage stops. The global systemic crisis will bring global geopolitical dislocation. In order to develop further, the world economy needs qualitative changes, which is a process of radical reconstruction. There are limits to serious reform in the current global economic system, but at no other time in the last half-century have those limits seemed more flexible.
Dear Bulent, thank you for taking the time to comment on our site GlobalCrisisNews.com. Your views and comments are highly valid and raise a lot of important questions for citizens around the globe. Time will tell how everything will effectively unfold. I look forward to your future contributions on our site.