The first thing to understand is that there is no world 'crisis,' not in the horror-movie form your newspaper implies. The 'crisis' was a fall of 3 or 4 percent in US national income peak to trough (as against ten times that amount from 1929 to 1933), by now made up. A high percentage of the new unemployed are Americans — unsurprisingly considering that the core optimism was overbuilding in the American Sun Belt (with supplements on the Spanish Costa del Sol and the Irish Coast of Much Rain). The panic of the Americano-centric crisis shifts like a balloon pressed down in one place, pushing up in another: Nevada, Iceland, Illinois, Estonia. But real incomes in the wider world are at all-time highs, and their rates of growth impressive. India, China, Australia, Chile in the past few years have done just fine.
'Crisis' comes from Greek krīnein, to separate, to judge, as at a trial, later extended to the decisive turning point of a disease, the turn towards death or recovery. Some people fear that our Great Recession of 2007-2009 is a prelude to death, the Last Crisis of Capitalism. The left regards such a death as a consummation devoutly to be wished, and has been heralding every recession since 1857 as The End. A recent cartoon in the New Yorker showed a couple looking back at a bearded man who had just walked past them in a prophet's robes, holding a sign: "The End is Still Near." Says the woman: "Wasn't that Paul Krugman?" During the 1980s the late Richard Rorty would go around claiming that the Savings-and-Loan "Crisis" was just that, the last judgment of capitalism. He could not be persuaded to think of it as a bad bet by owners of shopping malls, tiresome but normal in an innovative economy. "Dick, their bets proved wrong, and surely there was a good deal of scamming, too. But the magnitude relative to all economic activity is too small to be a world crisis, or even a national one. We Americans are selling Rockefeller Plaza to the gullible Japanese. Good for us. Quit worrying." "No, no: look at these amazing numbers. Billions, billions! Capitalism is finished!"
The rhetoric of a 'crisis' takes the headline today as the outcome tomorrow. Thus the Marxist geographer David Harvey points to the crisis in Southeast Asia in 1997 as typical of IMF-sponsored cuts in real wages (Harvey 2010). Fair enough. Yet he does not acknowledge the long-run good of the innovation thus secured — even in Southeast Asia, whose incomes for poor people now exceed what they were before the 'crisis.' The Mexican debt crisis of 1982 was followed by a decade of stagnation, true, and very nasty, though not the fault of the IMF. But now the real income per head of ordinary Mexicans is above its level in 1981, and is growing pretty smartly.
People want to think of our recent troubles as portentous, revealing deep scandals about the sinners amongst us, or to be exact amongst you-bad-not-us. The rhetoric sells newspapers, because we like being told that Bad People Did It. It is the master narrative of journalism, after all, from Rachel Maddow to John Stossel. The Democrats point to the greed on Wall Street during Bush II, and want you to draw the inference that Wall Street needs to be regulated much more closely. And anyway bankers are bums. They do not acknowledge that banking is already the most regulated industry in the country, and the stock market is not far behind. The Republicans point to the congressional instructions to Fanny May during the Clinton administration to offer mortgages to poor folks, and want you to draw the inference that subsidies to the poor are dangerous. And anyway the poor are bums. They do not acknowledge that Bush II also pushed for wider home ownership. . . .