Media task. Since the beginning of the 20th century, several economic crises have badly affected countries all over the world. Work in pairs. Go online and research basic information on one of these crises: the Great Depression, the Oil Crisis, the Crisis of 2008 and the Coronavirus Crisis. Answer these questions: What was it? When and how did it start? Which countries were/are affected? What was/is done to provide relief? Present your results in class. 23 The world economy After World War II, many industrialised countries experienced years of continuous economic growth. This meant full employment, rising living standards and wealth, which led to increasing consumerism, more holidays and long-distance travelling. In postwar Europe so-called welfare states aimed to look after the weaker members of society – the unemployed, the sick and the old. The oil crisis at the beginning of the 1970s and the period of stagflation1 that followed, brought about a change in economic systems. The model on which the welfare state had been based, called Keynesianism2, was replaced by neoliberalism. Industries were privatised, state-owned utilities sold off, unprofitable enterprises closed or relocated to cheap labour countries. The deregulation of financial markets in the 1980s, together with a blind belief in free-market economy, gave rise to a period of financial gambling, in which everything revolved around quick personal enrichment and shareholder value. There was no limit to speculation, more and more complex ‘financial products’ were invented, and there was an increasing divide between the real economy (based on goods and services) and a ‘virtual economy’ based on little more than the transfer of gigantic sums of money per mouse click. The ones who profited from this were bankers, company bosses and everybody who benefited from their wealth, like the luxury goods industry. The losers were, for example, the ‘working poor’ suffering from social exclusion. In 2008, when, due to the failure of homeowners in the USA to repay their mortgages, several big banks collapsed, this did not only affect the poor but also the middle classes. Many of them found themselves homeless or ‘half-homeless,’ which meant that whole families started living in their cars, in cheap motel rooms or in shantytowns. Globalisation meant that the crisis quickly spread to other economies, and Europe and Asia, for example, were affected too. In Europe many governments had made debts and lived beyond their means for decades. When these countries introduced austerity measures3 to reduce their debts, this – together with the slow-down in economic growth and the Euro crisis – meant an increase in unemployment figures. Especially in Southern Europe unemployment rose, and even well-trained young people could no longer find jobs. Doing unpaid internships or working in precarious employment, the ‘lost generation’ – as they have come to be called – often could not afford to leave home. This financial crisis came to be known as the Great Recession. After what looked like a brief recovery in 2010, the situation worsened again and, the so-called ‘contraction’ continued. This is a decline in national output as measured by the gross domestic product. That includes a drop in real personal income, industrial production, and retail sales. Toward the middle of a contraction, companies start laying off workers, sending unemployment rates higher. It is one of the four phases of the business cycle, also known as the boom and bust cycle. More than 10 years after the recession it was understood that urgent and concrete action is needed to reduce risks to the global economy and secure the foundations for stable and sustainable economic growth. A dynamic and inclusive global economy is central to delivering the ambitious targets of the 2030 Agenda for Sustainable Development. Policymakers must work to reduce short-term risks from escalating trade disputes, while advancing a longerterm development strategy towards economic, social and environmental goals. Future actions need to rely on a multilateral, cooperative and long-term approach to global key areas, including combatting climate change, sustainable production and consumption. 1 stagflation: ‘stagnation’ and ‘inflation’ – a combination of high inflation and rising prices with low economic growth and high unemployment 2 Keynesianism: an economic system that relies on government programmes to encourage employment and spending 3 austerity measures: action taken by a government to reduce its deficit e.g. by spending less or increasing taxation 65 Language skills Extras Explore 5 Money matters Nur zu Prüfzwe ken – Eigentum des Verlags öbv
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