|Image credit: acting-man.com
how do you cope with straitened economic times? Do you shake your fist in anger
at the past or even current government or blame it all on the collapse of oil
prices? If you are thinking ‘we never had it so bad’, cheer up. Booms and their
accompanying busts have been happening for centuries and the good news is,
clever ingenious resilient humans have been coming up with ways and means to
work themselves out of them.
is a brief history of booms and busts and how the busts were successfully
the first global economic crisis, one needs to look to the United Kingdom
(where else?), for the 1720 South Sea Bubble. The crash was brought about by
the sudden collapse of share prices of the South Sea Company founded as a means
for the United Kingdom to continue to fund two ruinous wars it was fighting in
speculating on British victories and the potential control of the lucrative
South American territories held by the Spanish, bought stocks and used their
“lucrative on paper” South Sea Company shares as a means for securing loans.
The problem lay in the fact that the South Sea Company’s assets were based on
conjecture of victory, and when the crash happened, it swept away businesses
that had essentially bet on a win.
all was not lost as within a generation, Britain went on to have a century and
a half of unprecedented growth: The Industrial Revolution. This period saw the
mechanization of manufacturing and agricultural processes. One could argue that
the crash of 1720 forced people’s hands to think beyond mere speculation and
create systems and solutions that built long term wealth.
a crash of biblical proportions, look no further than the 29th October 1929 Wall Street Crash, coming
hot on the heels of a decade of unprecedented growth in the USA and Europe.
Some argue that the Roaring 20’s were the Boom of all Booms, with steel,
automobile, retail and construction industries experiencing unprecedented
growth. A commodities crash precipitated by a slump in grain prices added to
the nations’ woes. What followed and gripped the now global interdependent
economies was The Great Depression, which lasted until the outbreak of the
Second World War in 1939.
a perspective of the severity of this crash, Global GDP dropped by 15%
(compared to the mere 1% of the 2008 crash) and unemployment reached 50%.
However, even then, it was not all bad news. Some global multi-billion dollar
institutions that are still going strong have their roots in the Great
Depression: including Fisher-Price, Universal Music Group and Morgan Stanley.
has proved that we cannot eradicate economic down times as they are part and
parcel of the capitalist system. However, what we can do is prepare: adapting
to different conditions and most of all championing innovation.
By Mazzi Odu