What does the history of economic crises show? The history of economic crises is a revealing, telling and insightful one. One of the first crises stated in the Roman Empire, some 2000 years ago. What is known about crises is that there are patterns that can be observed to help better manage them. This article aims at looking at those patterns.
While each crisis is unique, there seems to be patterns that are significant to discern. First of all, a lot of crises, especially recently, start of with bubbles deceiving masses. Take the Dot.com bubble burst of the early 2000s or the sub-prime housing crisis related to the Global Financial Crisis. These are both examples where misguided economic activity was followed by panic; thus, contributing to a crisis. Crises like these are possibly avoidable with sounder economic decisions and better policies and laws.
The second noticeable pattern is that crises often start in one place and have a ripple effect on the global economy. In the 19th century, several crises started the British Empire and spread across borders. Similarly, the United States have started economic crises in recent times. This reveals the following two points: 1) hegemons have greater effects on the global economy and 2) the world is growing more interconnected.
The rise in the frequency of economic crises points to possibly one of two things. Either feudal and imperial systems are more stable than capitalist ones or, more likely, crises has grown with parallel growth in interconnectivity. That is not to say that interconnectivity is bad, but that it calls for better governance at all levels of aggregation, including local, national and global governance. Interconnectivity has led to increased wealth for many people. We live in the age on information as a direct result of globalization and advancements in technology.
To conclude, the history of economic crises had revealed a lot. Friedman said that they occur every 30-40 years. They are also precluded and succeeded by periods of growth, known as booms. Possible causes of crises are known, including bubbles. Patterns are also discernable, revealing much and aiding future governance.