The Great Recession

Abstract

The Great Recession could be attributed to several factors; nevertheless, the actions, reactions, and interactions of the following forces explain why the recession occurred, how it unfolded, and why it lasted so long. They should also guide us to develop the necessary policies to address some of the recession’s social and economic implications and reduce the probability of having to endure similar recessions in the coming years and decades.

• 1. The success of capitalism to build an industrial capacity around the world that exceeds the current absorption capacity of the world’s population;

• 2. The integration of the world’s national economies to the point of creating a global economy that caused global production relations to change significantly and affect social and economic structures everywhere;

• 3. American and European states’ policies to spend beyond their means, causing budget deficits to widen and public debts to skyrocket;

• 4. The success of a few exporting states to accumulate large financial surpluses and create financial liquidity that encouraged banks to take unwarranted risks;

• 5. A blind belief in the virtues of free markets that led governments to loosen financial regulations and underestimate the need for official oversight;

• 6. A greedy capitalist class that controlled the largest banks, insurance companies, and corporations, particularly in the United States, and used them to serve their own interests at the expense of the welfare of their employees, the general public, and the national interest; and

• 7. The failure of most states to defend their poor against exploitation and protect their middle classes from near destruction.