One decade after the Lehman crash, more attention still goes to explain the "trees" behind the crisis than the "forest" they belong to: either Lehman itself, its fellow victims, finances, sub-prime mortgage and so forth, but not the underlying forces that gave them meaning, a face, and the capacity to bite. This may be only natural, since recovery from the costs and pain is time-consuming. Yet, unless the big picture is at least identified, no diagnosis can follow, nor any policy-making adjustment made to replace ad-hoc and short-term responses with more meaningful solutions. Unfortunately, the long-term, that is, in this case, the "forest" itself, is more than the sum of the parts (those short-term gestures added up). References have often been made to the 1929 Wall Street crash, but few drew long-term lessons from it to effect concurrent correction. It was not until 1933 when President Franklin Delano Roosevelt launched that New Deal that we saw fragments of long-term thinking, as the 1934 adoption of the Reciprocal Trade Agreements Act. Even these were not enough.
Some of the missing long-term elements were only pinned down far later, and left for the substantive elaboration by academics rather than policy-makers. It might help to expose two things that could help pave the way out of the post-Great Recession morass: path-finding technological innovation; and the global context.
Neither the 1929 nor the 2008 crash was directly or immediately caused by any technological innovation swallowing jobs. Yet, this was part of the big-picture, unfolding slowly, irreversibly, and malignantly: mass-production. For manufacture, this was through the assembly-line, for agriculture through mechanisation. Antonio Gramsci called the former 'fordism' in 1934, named after one of the many automobile company entrepreneurs, in 1934. Yet, the man whose name it bears, Henry Ford, made his T-model breakthrough and fortune by World War I (which helped him sweep ahead of his many competitors). For agriculture, tractors and other farm machines drastically reduced the rural population from one-third of the U.S. population in the 1920s/1930s to single-digit numbers by the 1960s. They were the first and longest beneficiaries of FDR's New Deal intervened.
Nonetheless, 'fordism' globalised manufacturing, exposing the other element: the competitive global context. What it exposed was simply that the United States had the economic clout to take up world leadership from those trying to grab it across West Europe. Great Britain was widely regarded as the world leader then, though Germany was out to grab it, while France still considered itself one of the contenders. Russia or Japan were either too far behind or too far away to manage. The United States fitted in, driven by economic ingenuity.
Fast forwarding to the 21st Century, we might be serving the same tussles, but with different names and labels. Technologically, if not artificial intelligence contraptions, then certainly Internet of Things (IOTs) or information technologies (IT), had begun to do the damage by the time of the Lehman evaporation. In the time since, we certainly have seen the deleterious effects of both growing. In fact, the Great Recession recovery was so glacial precisely because full-time jobs have been disappearing: either replaced by part-time jobs, or gone completely; and if not gone completely, serving the notice to do so.
It is not by coincidence that these would prey upon world leadership, with U.S. claims facing one of their biggest challenges. China is poised to become the world's largest economy, but it is not just that: it boasts more competitiveness over a wide range of traded items than the United States, with far lower wages over comparable products; and it has scooped up more global cash than the United States can summon through its own multinational corporations.
Both technology and the global context have played more havoc upon national economies than financial intervention. That is not to say that financial crises are over: they are not by a long shot, indeed, may be standing right outside our front-door at this very moment. Banks everywhere face sluggish business compared to early-21st century performances, investors run into one stumbling-block after another, and there happens to be more competitors than ever before for any one country to steal the show. Lehman was felled by sub-prime lending, but crypto currency waits in the wing today to throw a similar curve-ball.
Wealth is on the run in industrialised countries, a chunk of it absorbed across Asia. One recent statistics that Asia now has more billionaires than the United States portrays this, but it would be a mistake to say Asia profited from particularly the United States because of the 2008-11 crisis: Asian exporters were dented since western markets were their dominant outlets; and even China found its growth-rate clipped from near-double-digit levels. Even without the extra export income, though low-waged Asians could bank on sturdier national economies than their high-waged Atlantic counterparts: many more of them were trading with each other, often for the first time, or expanding beyond previous records, while Atlantic seaboard countries had either already approached the peaks of commercial exchanges or faced more restrictions among themselves than Asians did. Of course, China literally scooping up massive trade surpluses, fed this gap. That is precisely the point.
China was building not only its money-bank, but also projects worldwide, not just petty projects, but infrastructures for many countries that had not even had an eye-catching infrastructure, even before the Great Recession began. It was loaning right, left, and centre, but lending at higher rates than elsewhere simply because money was nowhere else to be found as abundantly and with such minimal conditions. If we contrast these to macroeconomic ills plaguing the U.S. economy, we see that big-picture much more clearly than appraising any Lehman or sub-prime crisis: it has again built up an enormous trade deficit after the Clinton administration had put the country back on the positive side of the commercial ledger; too much spent not just on many wars against unfortunate terror threats, but also imaginary terrorists (Iraq exemplifies this imaginary type for those who recall George W. Bush pegging his 2003 Iraqi invasion upon the embarrassing "Saddam tried to kill my dad" explanation); and, as in the 1980s, a strong dollar haunting not just U.S. citizens, but also a growing list of 'emerging countries'.
There is a lot of blame to go around why the Great Recession recovery has eliminated the adjective from that equation ('great'), but not the noun (the economic condition): populism emerged wherever the middle-class lost its wealth; but prosperity greets others, many in Asia. Yet both skate on thin ice: the former by creating the 'gig' economy, the latter with stable market-access evaporating under intense competition. Energising these endogenous dynamics is China's presence releasing exogenous pressures.
How the global economy can be cleansed of its bugs depends upon the degree to which government intervention is minimised, proper taxes pave the way to prosperity, and illegal flows get disrupted, and an end is made to war. "Man born free," observed Jean Jacques Rousseau, "is forever bound in chains." It is time to loosen some of those chains.
Dr. Imtiaz A. Hussain is Professor & Head of the newly-built Department of Global Studies & Governance at Independent University, Bangladesh.
