The Impact of Financial Crisis on World Economy: A Personal Perspective

We are living in the strangest of Recessionary times. 

People call it a Meltdown, or better still Economic Meltdown, Depression Economy, Economic Slow Down, Downturn, Crisis, etc. Simply put, the impact of the financial crisis on the world economy came as a huge shock. The fantasy of economic prosperity has gone bust.

A large part of this crisis-laden story that is doing its rounds all over the world like a Damocles’ Sword hanging over our heads has been hardly surprising to us. But all this turned up, nevertheless, as a shocking reality of sorts! Even as we know that the world’s so-called globalized economy is largely supported (purported?), buoyed, or even propagated by the U.S., the very roots of globalization which began germinating in the form of all-round prosperity have been found to be recklessly pounded upon. 

The so-called “trickle-down economics” funda had taken a thorough beating in the hands of our made-up market forces! That great western nation has almost single-handedly corrugated the entire market economy of the world into its own private enterprise; and even as we talk, its evil effects - no less - have been awfully catastrophic for the whole world to bear. It broke the stable economy of several developed and underdeveloped nations into smithereens and in the near future, as we might be able to foresee, the Economic Meltdown nightmare might not be something any nation in the world will be able to come out of successfully, sooner or later.

Instant job losses the world over, companies shutting down, projects getting cancelled and abandoned, pink slips handed out, emotional and psychological disasters befalling, out-of-work sickness, etc., etc. For those people who have withstood or are in some way surviving this continuous turmoil, the meaning of life for them has suddenly become a hopeless burden to carry on with.

Let me relate a small experience to you. I represent a major New York-based software solutions IT corporation. Our company began its professional dealings with a major banker in the US and other financial behemoths from the same country. We fixed software projects such as software financials, web development, and other software product development. Each project was worth millions of dollars. So beginning to labour on these fresh assignments, we settled down to our individual business production practices and, as we did that, a mild tremor of a recessionary slow down picked up a race with us last year in September 2008 and set up a wall of injustices against us. It’s going to gobble one full year now and there’s hardly any sign of it letting go. Decidedly, we moved on to other greener meadows, hoping to be away from the abject misery that seemed hell-bent on destruction. But there too the same miserable story of recession played out, day after day! How much time will it take to subside and eventually ward off its foul iniquities? No one knows, and everyone is enormously confused and crestfallen about it.

Before the advent of the financial crisis, and when things were just as even as we have known, the United States of America lavished money-flows into India in the form of a variety of corporate investments, including perpetual philanthropy. The Information Technology (IT) that India mastered over the long and hard years of toiling work and its world-class production of computerized software for the nations of the world, mainly the US and Europe, has presently gone out of sheen. Loads and loads of project cancellation bills crashed in on us. The funding stopped due to the transient crisis that rose from its own botched-up attempts at loan recovery and the sub-prime financial banking system. India, for good or worse, has always been invariably dependent mainly on the US for its products to be bought. But India survived solely due to its excellent and orderly financial systems.

Is the Great Meltdown of 2008-2009 somehow had to come after the Great Depression in the US of the 1930s/40s? Whatever reasons we might deduce and try to explain to ourselves; it has thrown up some very pertinent questions about the very nature or idea of globalized Financial Markets and Financial Economies; the way it is being handled; the bottom lines the companies keep talking about and go great lengths to achieve by hook or by crook; the cooked-up profit and loss statements, the commodity markets syndrome, the ever-increasing need for the market sources and resources and all their ubiquitous workings and dealings have all crashed like hell upon the aspirations of the common people of each nation involved in this conundrum. All this has been clearly - and undeniably - devastating in their consequences for us to sanely and calmly reflect upon.

So what will stimulate our stagnant economy? What will give this horrible fiscal deadlock a break? Who or what will break the ubiquitous coconut to usher in a refreshing change of economic normalcy? When are we going to be back in business, just the way we were before this monstrosity of a Recession began hovering over our heads? Perhaps, only time will tell.

A fundamental aspect that we can readily understand is that if our country’s strong-willed globalized economy has to get back on track – probably back with a vengeance now – then it is for our foremost governmental agencies and watchdogs to take up the cudgels and react fast to enforce some healthy confidence-building measures for the general market economy to revive. Surely, they did act responding in the way it is meant to be done. 

Our revered Reserve Bank of India - R.B.I. – braved this challenge admirably with all its might and took up several fiscal dealings, even altering some tried-and-tested policy measures, to positively enthuse our country’s financial system with intense capital flows; all for the general spectrum of our economy to come about posting robust results. Therefore, as experts say, creating more jobs, bringing down the food prices, driving the capital markets by offering concessions, discounts, and bailouts, and enduring some practical cost-cutting alternatives, will soon hound the hydra-headed monster called “Recession” to put its tail between its legs and run! It will gradually and effectively seize to exist.

Lastly, the implications of this huge impact on the financial economy, in combination with the major commodity market shocks, and the housing downturns in the US are mighty hard to scale and talk about insane terms! The consensus is that the global economy is set to weaken further. Growth is slowing and it will be so for a long time to come! In emerging economies, like that ours, looking forward to the opening of markets is a tough cookie to savour! The sole concern for developing nations like India should be whether the slowdown will be superficial and somehow be pursued by a steady recovery later, or whether the downturn will be profound and prolonged. The recession is not over yet, mind you.

Yes, as far as we understand, the core issue about this “clear and present danger” called Great Meltdown (Downturn) is that it will have to be addressed eventually of how to thwart excessive risk-taking in the future, without actually stifling the potential (or whatever of it is left now in the present context) of ‘effective financial markets’. Still, hope floats.

Keeping in view of the trying times we are facing, I, for one, truly wouldn’t give cent percent marks to the decaying roots of the idea of Globalization and the trifling concept of Market Economy because of the dreadful consequences of having to keep fresh and rotten Apples both in one basket are far too severely crippling than we could care to imagine before; and all those inescapable degrading effects - such as all the shreds of evidence discussed above - are there for anyone to judge, but, folks, judge for yourself judiciously.

By Arindam Moulick