The 2008 recession began in the US and UK economies before spreading across the whole world and plunging it into the worst economic crisis since the Great Depression. Several financial experts have suggested that the economy has never recovered from the shocking crash from more than a decade ago. Additionally, since the pandemic began, more experts have been warning that 2008 was a “dry run” for the crisis on its way with coronavirus.
For instance, Kenneth Rogoff wrote in The Guardian in April: “Short-term collapse in global output likely to rival or exceed any recession of the last 150 years.”
During the BBC podcast, ‘Witness History’ from May 2019, journalist and podcast host Louise Hidalgo interviewed the IMF’s former chief economist Raghu Rajan who warned the economy is close to another crash.
Ms Hidalgo explained: “He believes conditions could exist for another financial crisis.”
She also spoke to another expert, political economist Ann Pettifor, who “is more pessimistic and says the next crisis could be worse”.
Chancellor Rishi Sunak – economists see coronavirus causing a greater economic downturn than in 2008
Economists warned of the crash years before it occurred
Both foresaw the economic crash of 2008 years before many in the same industry believed such a fall was possible — and their concerns were cast aside at the time.
Writing in The Guardian back in 2006, Ms Pettifor explained: “The world is in a financial mess.
“Worse, Anglo-American economies could beheading for the kind of prolonged period of debt deflation that Japan is just emerging from: 15 years of economic pain, unemployment, family breakdown, social unrest and rising nationalism.
“As the US and UK economies have been ‘engines’ of global growth for the past decades, a similar crisis to Japan’s will have a far worse impact on the global economy.”
Some fear that coronavirus will cause a greater economic crisis
She also pointed out that the-then governor of the Bank of England, Mervyn King, “inherited” the financial chaos from his predecessors and issued “stark warnings”, but by then, she claimed, it was “too late”.
Ms Pettifor said that little could be done to prevent it, and instead we “must await the coming first world debt crisis”.
She continued: “[The taxpayer] will pay, over and over again, to clear up the mess.”
At the time, she suggested that industry and labour would have to overcome their differences to build a new financial system otherwise it would repeat itself.
Her predictions came true.
Writing in Red Pepper in 2017, Ms Pettifor explained: “Ten years on, that slow-motion crisis, a prolonged period of disinflation, noflation, and deflation is still playing out.”
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Black Friday headlines from the Evening Standard dating from 2008
Mr Rajan, who was Chief IMF economist between 2003 and 2006, said he began to question whether the financial markets were actually that stable, when everything has hidden risks.
He decided to warn the industry but he was heavily ignored at the time.
Greek Financial Minister Yanis Varoufakis also claimed that austerity has not actually ended only in March this year — and he pointed out how coronavirus will have made the situation much worse.
During a video posted on his YouTube channel DiEM25, he explained: “Don’t let anyone tell you that the 2008 crisis ended and that now you have a new one.
“That crisis never ended. It just moved in different forms, travelled from one continent to another.
“But nevertheless it has always been with us.”
He added that the world failed to return to “equilibrium” after 2008.
He continued: “What coronavirus has done, it has deepened and accelerated this never-ending non-stop crisis that began in 2008.”
The Financial Minister said that central banks and governments tried to reflect the markets themselves by printing money and handing to corporations which were already wealthy, such as Google.
He claimed that in turn this boosted inequality, stabilised financial markets but depleted all serious investments in labour, health and education.
The finance minister continued: “When coronavirus arrived on the scene it found a global capitalism that was sitting on a gigantic bubble of private debt that had been minted by central banks on behalf of financial capital.”
Mr Varoufakis added that coronavirus has “pricked the bubble” financial capitalism was resting on.