Globalisation Under The Microscope: The World Stage
The Global Financial Crisis in 2008
World map showing real GDP growth rates for 2009. (Countries in brown were in recession).
According to the Wikipedia website, (whereby significant documentation, papers and statistics were provided and is thus the basis for most of the information provided in this study), the late-2000s financial crisis, also known as the “Global Financial Crisis”, or the "Great Recession", is considered by many economists to be the worst financial crisis since the Great Depression of the 1930s.
It resulted in the collapse of large financial institutions, the bailout of banks by national governments and downturns in stock markets around the world. In many areas, the housing market also suffered, resulting in numerous evictions, foreclosures and prolonged unemployment. It contributed to the failure of key businesses, declines in consumer wealth estimated in trillions of U.S dollars, and a significant decline in economic activity, leading to a severe global economic recession in 2008.
The financial crisis was stated to have been triggered by a complex interplay of valuation and liquidity problems in the United States' banking system in 2008. The 'bursting' of the U.S housing bubble, which peaked in 2007, caused the values of securities tied to U.S real estate pricing to plummet, damaging financial institutions globally.
Economies worldwide slowed during the stated period, as credit tightened and international trade declined. Governments and central banks around the world responded with unprecedented fiscal stimulus, monetary policy expansion and institutional bailouts.
Capital injection by governments was made systemically as was the case in the United Kingdom, while various central banks worldwide cut interest rates to help borrowers.
In Nigeria, (after the crisis), subsequent focus on stricter regulations comprising global reporting standards and enhanced risk management, has led market watchers, in recent times, to be optimistic that the Nigerian banking sector will most likely wax stronger as time elapsed. Nevertheless, financial experts have stressed the need for the Central Bank to review all relevant laws relating to the financial sector in order to strengthen its regulatory capacity*.
Many causes, reasons and explanations for the financial crisis have been suggested, with varying weights assigned by experts.
Notable however, is the Levin–Coburn Report, issued in 2011 by the United States’ Senate. It found that the crisis was not a natural disaster, but the result of the following:
- High risk, complex financial products;
- Undisclosed conflicts of interest;
- Failure of regulators, the credit rating agencies and the market itself to rein in the excesses of Wall Street.
Repercussions around the globe
In my opinion, the 2008 Global Financial Crisis was a perfect example of the 'domino effect' of globalisation.
It highlighted a development whereby a significant crisis in the U.S triggered a global financial meltdown, with disastrous consequences experienced in other parts of the globe, examples of which were the following:
Involving all three of the country's major banks, which relative to the size of its economy, was the largest banking collapse suffered by any country in economic history.
Whereby growth fell from more than 10% in 2007, to close to zero in 2009).
Whereby growth, 7% in 2007, was predicted to reduce to only 3-4% growth in 2009.
Whereby the fall in oil price affected the rate of accumulation of the external reserves. Moreover, declining capital inflows into the economy exacerbated the problem of relatively-high operating costs, occasioned by decaying infrastructure such as power and transportation.
The capital market downturn, as well as divestment by foreign investors, lead to loss of investors' confidence and increase in non-performing loans granted to investors in the stock market. Statistics showed that since banks constituted over 65% of market capitalisation, the consistent decline in the stock market affected banking stocks more than any other sector*.
An interesting outcome of globalisation is the fairly-new development whereby business communications have espoused a more revolutionary role - moving away from its conventional task of disseminating information, to a stronger position of impacting the following in an organisation: operational effectiveness, profitability, corporate identity and management of its human resources.
I am convinced that companies in this dynamic era should place greater importance on communications. This is not only due to the practical correlation between an effective communications strategy and a healthy corporate image, but also because of the frequently-demanded component of accountability from the public, especially in the wake of corporate scandals.
Indisputably, the impact of globalisation is not only visible in the 'new' employment relationship but has broader implications for our way of life : from the social/cultural/business realms to the economic sphere. Understanding its various interplays is crucial to adapting to often-unpredictable scenarios and remaining relevant, whether as an employee, an organisation or an economy.
* Information from The Abuja Enquirer website.
* Information from The Abuja Enquirer website.
N.B- Image courtesy of freedigitalphotos.net.