IMF Warns of Eurozone Crisis Leading to 30′s Style Slump and War

December 17, 2015

business, Eurozone Crisis Timeline, news


There is a lot of talk in the news these days, comparing our current economic climate to that with which we faced in the 1930’s. Only recently the IMF warned that if the global community did not settle their differences and start working together to tackle the Eurozone’s deepening debt crisis, we would all be heading for some very gloomy days indeed.

DAVOS/SWITZERLAND, 27JAN11 - Christine Lagarde, Minister of Economy, Finance and Industry of France; Member of the Foundation Board of the World Economic Forum, speaks during the session 'Redesigning the International Monetary System: A Davos Debate' at the Annual Meeting 2011 of the World Economic Forum in Davos, Switzerland, January 27, 2011.  Copyright by World Economic Forum swiss-image.ch/Photo by Michael Wuertenberg

Christine Lagarde - Source Flickr

Stark warning

The head of the IMF, Christine Lagarde, made her strongest warning yet about the state of the world economy and said if the international community failed to co-operate the risk was of “retraction, rising protectionism, isolation”.

She also painted a much more vivid picture that the failing economy was only ancillary to much greater risks, when she said:  ”This is exactly the description of what happened in the 1930s, and what followed is not something we are looking forward to.”

What Lagarde is referring to of course is World War II.

If you would allow me to indulge in a little scaremongering for the sake of clarity, the chairman of the IMF has essentially made an official statement, saying that: if nothing changes, we are on a course for another World War.

In my opinion it’s not all 1930’s at the moment either, there is quite a lot of the 1890’s in the air to me too.

A lesson from history

Before the 1930’s ‘The Great Depression’ was the moniker given to a slightly less virulent global economic downturn that lasted on-and-off between 1873 and 1896.  Though perhaps not as devastating as it’s more contemporary brother, it severely blighted the lives of the common man and fanned the flames for the First World War and the rise of communism.

What is most strikingly similar between the world today and that of the late 19th century is the extraordinary gap between the poor and the wealthy.

America’s top bosses enjoyed pay hikes of between 27% and 40% last year, according to the largest survey of US CEO pay and at the same time the latest government figures show wages for the majority of Americans are failing to keep up with inflation.

Since the 1980’s the distribution of wealth has been falling heavily in favour of a tiny minority, while the rest of us haven’t seen a wage increase in relative terms since the 50’s.

This may sound absurd to you when you think of all the things you can afford now, that your grandparents could not, but the reason we haven’t noticed, is that as all the money was being syphoned off to the board of directors, manufacturing was being moved to the east.

As a result products became cheaper and our measly wages went further.  The rise of wealth in the west from the 1980’s onwards has been an illusion.  Not since the 1890’s has the gap between the rich and poor been so pronounced.

Pressure is building

Twice, a long deep recession coupled with a disproportionally wealthy aristocracy has led to a world war and revolution.

Apart from a few crazies and ill-advised students, none of us are looking for a world war or a communist revolution, but if the richest few don’t start to find a workable way to share the burden and spread their wealth, the desperation of the masses may reach boiling point.

What are your thoughts about the deepening crisis and its historical parallels? Is it a pointless comparison or do we really have something to worry about? Leave your thoughts in the comments below.


Related posts:

  1. The Eurozone Crisis: Timeline
  2. Alan Johnson warns against coalition spending cuts
  3. 40% of households suffer financial slump
, , ,

About Simon Power

View all Simon Power