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10 years since the crash: causes, consequences and the way forward

10 years since the crash: causes, consequences and the way forward

The 2008 Global Financial Crisis was a cataclysmic event, the worst to befall the global economy since the Great Depression of 1929. This pamphlet marks 10 years since a key turning point in the proceedings: the collapse of Lehman Bros on 15th September 2008, the biggest bankruptcy in history. The crash came as the conclusion to decades of financial deregulation, beginning in the 1970s and intensifying in the 1980s. There were many major financial crises over this period, while the years between the end of WW2 and the 1970s were virtually free of such turmoil. The most recent crisis, however, dwarfed its predecessors in both its scope and its scale. Alan Greenspan, former Chairman of the US Federal Reserve has now admitted that that the thinking behind the regime of the deregulation he oversaw was flawed; he had overestimated the ability of a free market to self-correct and had missed the self-destructive power of de regulated mortgage lending. In 2009 he said: “The whole intellectual edifice… collapsed in the summer of last year.” This intellectual edifice was built up by neoliberal economists from the 1930s onwards. They intensely disliked the very idea of government intervention, and so devised economic theories designed to ‘prove’ that markets – including financial markets – would achieve optimal outcomes if left alone with minimal regulation. To do so required a set of assumptions breathtaking in their detachment from reality. These were the intellectual underpinnings that led to the Global Financial Crisis.