Sunday 05 Feb 2012 @ 12:15
Think Tanks
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Nef: How did we get here?
The economic crisis explained
We are in the second phase of an economic crisis which is global in its scale and reach, affecting all our major institutions and established ways of thinking. How did we get here? And what can we do now to prevent worldwide economic meltdown?
We are in the second phase of an economic crisis which is global in its scale and reach, affecting all our major institutions and established ways of thinking. How did we get here? And what can we do now to prevent worldwide economic meltdown?
Executive Summary
The UK is sliding back into recession and Eurozone unemployment has hit new highs. Uncertainty stalks China, Brazil and other rising economies. We may be heading for a global recession.
Politicians call for austerity and little else. But spending cuts are economically illiterate. They wreck weak economies by locking them into a cycle explained by John Maynard Keynes over 80 years ago:
- Cuts mean job losses and falling demand for goods and services.
- Falling demand means firms sell less.
- Firms selling cause wages to fall and unemployment to rise even more.
- Demand for goods and services falls further.
- Then, as demand collapses and economies shrink, debts become unpayable.
Breaking this vicious circle is the first step towards recovery. But we can’t return to the old world of chronic dependence on carbon and debt. This is a short guide to how the crisis broke, and some ideas on how to get out of it.
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