The Global Financial Crisis, which heightened following the collapse of Lehman Brothers in Autumn 2008, was not the first, nor the last financial crisis, the world has seen.  The scenario that the world is facing at the moment has some similarities with that of the 1930s, and numbers of political figures and commentators have alluded to this. Said UK Cabinet minister, Ed Balls: "I think that this is a financial crisis more extreme and more serious than that of the 1930s: We now are seeing the realities of globalisation, though at a speed, pace and ferocity which none of us have seen before. The reality is that this is becoming the most serious global recession for, I'm sure, over 100 years."  Charlie Bean, The Deputy Governor of the Bank of England added: 'This is a once in a lifetime crisis, and possibly the largest financial crisis of its kind in human history."

 

According to the recent financial stability report issued by the Bank of England, the global financial system in 2008, came "close to collapse" as losses from the credit crunch look to reach $15 trillion.  Across world stock markets in 2008, the London FTSE dropped 31 percent; Dow Industrial dropped 34 percent in 2008; the NASDAQ 40 percent.  In developing economies and developed economies falling retail sales, declining advertising revenue, declining manufacturing output, declining global demand for engineering products, falling trade volumes, have stressed these markets and severely constricted economic activity.  Consequently, industrial output and exports have decreased in countries such as Germany, Japan, UK, and the US.  Unemployment has risen to levels in some developed economies not seen since the mid 1970s, while growth levels for the Eurozone are predicted to be zero for 2010

 

Characteristic of a deepening recession, the world has seen widespread layoffs of staff in blue-chip firms and industrials. Major global employers over the past six months to have shed between 5 percent and 20 percent of their workforces due to falling sales and revenues.  These include, Microsoft (5000), Nissan (20,000), Honda (3,100), General Motors (2,000), Sony (8,000), DHL (9,500), GKN engineering (2,800), Spanish bank Santander (1,900), Swiss Bank UBS (20,000), Transport for London 1,000; UK steel firm Corus (4500), Barclays (2,100, HM Revenue and Customs (3,400),  British Telecom (6000), Caterpillar (20,000), Philips (6,000), Pfizer (18,000), AT&T (8,000), Home Depot (7000), ING (7,000), Citigroup ( 52,000). 

 

Such a trend shows little sign of abating.  In the first six months of 2009, on average 600,000 people per month were unemployed in the US.  Following 13 successive months of increasing unemployment, the European Commission now forecast that Europe is set to see unemployment rise to the ‘highest levels since the end of World War II, with 8.5 million Europeans expected to lose their jobs in 2009 and 2010. The return of mass unemployment in Europe would drive the jobless rate in 2010 to 11.5 percent in the eurozone and 10.9 percent in the EU.’

 

Reaching such a level of unemployment figure through a deep and extended recession, raises the question: How far off is a recovery?  A conservative estimate to this question is possible.  If Eurozone unemployment were to reach their highest levels at the end of 2010, and such is also suggested for the UK and Ireland where Irish unemployment now predicted to reach 12.5 per cent by end of 2009 and 15.5 percent by 2010 as GDP falls 8.5 percent in 2009 (IMF), then it is likely a period of trough will engage before recovery begins, as the economic downward spiral arrests and settles.  How long this trough period lasts is unknown.  If, however, the economy was a single year at the trough stage, based on historical precedent recovery has taken at least as long as the period to reach the bottom of the trough.  By this reckoning, we might expect to see a return to 2007 levels of employment by 2013/2014, assuming growth could be sustained at a rate as fast as the decline, though this would be optimistic given the speed of the downturn to date.  What this means is that economic strategies should be directed toward medium-term recovery, aimed at mitigating the effects of entrenched unemployment, and be enterprise-driven, that is, not merely rely on price recovery.