[Viewpoint] 12 months on, have we recovered?It has been a year since the American investment bank Lehman Brothers filed for bankruptcy and ignited a worldwide financial crisis that changed the global economy and individual lives all over the world.
A considerable number of financial service firms have disappeared, and more companies filed for bankruptcy or saw their businesses teeter on the brink of disaster. Countless people lost jobs, and those who were fortunate enough to keep theirs had less money in their pockets. Many countries spent astronomical amounts of tax money trying to prevent a chain reaction of bankruptcies and just as much trying to stimulate the economy.
A year on, the global economy has recovered from the initial shock and confusion.
Companies and investment banks have stopped going out of business, and financial markets are beginning to function normally. Stock prices and real estate prices that had plummeted have started to stabilize, and international trade is bouncing bank. The uncertainty and tension from the crisis are disappearing, and people seem to be getting back to life before the crisis.
We even have the luxury to forecast the timing and strategy to get out of the crisis. At this rate, we might even be able to go back to the happy days before disaster struck.
Unfortunately, that’s not how things work. The recession happened, and we cannot pretend it did not. The world before the crisis will not come back no matter how long we wait, and we cannot go back to the past even if we want to.
The downturn has changed the framework of the global economy as well as individual lives, and we find the scars everywhere. We are just trying hard to get accustomed to the changed order.
The main point now is the direction the changes take. Which way is the world turning after the crisis? Will the world economy fully recover from its injuries and get back to full fitness? Or will we mend the wounds only temporarily and let the fire of another crisis kindle?
We all hope for a healthy and dynamic new world. But the new world will not just come to us. If we are to make a whole new world, we have to do more than simply treat the external wounds.
We need to treat the psychological damage and trauma from the downturn and prepare for another recession in the future by building strength and improving health. Only then will we be able to prevent another crisis, and even if we are faced with one, we can endure and overcome.
We also have to acknowledge that emergency treatment is not enough to recover someone’s health. Little more than first aid treatments have been given to Wall Street, the epicenter of the crisis. Strict regulations were demanded initially, but little financial reform has been accomplished, and little improvement has been made to the supervisory system.
There has not been much repentance over slack management and extreme greed, either, and not much effort has been made to avoid or reduce risks.
Instead, just when we thought the worst was over, the practice of paying enormous salaries and bonuses is coming back and risky derivative products are being traded again.
Major U.S. banks have made profits largely thanks to the assistance of the U.S. government and loose accounting standards, but they protest at reform measures. They were saved with taxpayers’ money yet defy changes.
The emergency treatment of bailouts barely saved a patient, but now he is back on the street under the influence of painkillers that don’t treat the cause of the illness.
That’s why we are so anxious.
The Korean economy has been hit hard by the downturn, which originated in the United States, and the world has been surprised by and envious of Korea’s rapid recovery. However, unless the American financial markets are improved, we cannot prevent a future crisis by ourselves.
If we cannot prevent a crisis, we need to at least be able to dodge it, or we need to build up strength to withstand the shock waves.
The foreign currency system has to be improved, and we need to have a safety net for the supply and demand. Banks should build up strength, and the base for domestic demand needs to be reinforced.
That’s the grim reality of one year after the start of the financial crisis.
*The writer is an editorial writer of the JoongAng Ilbo.
by Kim Jong-soo