Last month was the tenth anniversary of the catastrophic early signs of impending financial doom. Even those not in the business found themselves glued to the financial news as the behemoths of Wall Street and The City began to creak under the strain as financial instruments with impenetrable names and impossible complexity started to go bad. The terms Fannie Mae, Freddie Mac, mortgage backed securities, CDO’s and subprime became as familiar as the sight of bank workers walking out of skyscrapers with their desk in a cardboard box. The credit crunch, as it became known turned into the worst depression in nearly a century, and the first really big one since finance became truly global.
Many books have been written, many movies and documentaries shot on the subject in the intervening decade trying to unravel the mess, to figure out how it started and to make sure it doesn’t happen again, ever, but the impact on global politics has often been overlooked.
The decades before the credit crunch had, by and large, been good ones economically, in the West prosperity was generally on the increase, interest rates steady and unemployment low, and as is usual during the good times, people weren’t all that interested in working out why, they just got on with working, earning, borrowing and spending. The truly huge holes in the global bank balance changed that all pretty rapidly. Unemployment shot up in many places and we became familiar with another term. ‘Austerity’, the holes in the economy were shored up by the government, who, in turn, began to raise taxes, and spend less to pay for the mess. The perception became, correct or not, that it was the rich that created the mess, and everyone else was going to have to fix it, by getting a lot poorer in many cases. The sense of injustice is was palpable and remains strong ten years on as people lost all trust in the banks, their politicians, and to an extent, with authority itself.
It began in Greece, a country with many economic problems of it’s own, buckled under the extra stress of EU imposed austerity in return for bailouts. In an instant the old names from the old political parties were swept aside as the young, angry politicians of Syriza were carried to power by popular uprising. Across Europe similar stories were being played out. In Spain Podemos came from nowhere to come close to unseating the rigid two party system, Germany has seen a rise from the right wing AfD, Austria, Italy and the Netherlands have all seen surges in right, or left wing parties that have little in common except that they were new, not part of the old system and addressed directly the fears and concerns of those hit hardest. Only a few months ago France elected Macron into the Elysee Palace, a man with no political experience, and no political party, and he appointed many with no political experience, or history into important and powerful positions. In the UK the anger of the man on the street was expertly addressed by UKIP and their leader Nigel Farage who directed that anger at the European Union. It maybe a stretch to suggest that the credit crunch led to Brexit, but the winning margin in the election was close enough to make it at least plausible that it contributed. Meanwhile the British Labour Party was taken over in another coup, this time from one of it’s own, Jeremy Corbyn, who came from the margins to lead the party on a wave of popular support, and came closer than anyone expected to becoming Prime Minister in this summer’s general election, and the odds of him winning the next one are shortening all the time.
Last, and by absolutely no means, least Donald Trump. He galvanised the voice of America’s disenfranchised silent majority, spoke directly to their anger and told them exactly what they wanted to hear, to overcome impossible odds and seize control of the Republican party on his way to the oval office while the world watched with open mouths that have yet to close.
It is tempting to look back at the events that began ten years ago on Wall Street as a chapter in history, but the changes in geopolitical landscape it caused are something that will be with us for generations to come.
Phil D. Coffers
The Islander Economics Correspondent