Lisa Simpson
Jan 7,2010
In: Finance

The Rebuilding After the Financial Crisis

Although the financial crisis has not yet become history there are talks of rebuilding. It is now 15 months since the panic button was triggered with the collapse of Lehman Brothers. Many questions remain unanswered in the middle of restructuring discussions.

Is the crisis still on? Is reform at all necessary? What should be restructured?
The rescue operations through the central bank have brought back the financial markets nearly to the levels prior to 2007. The commercial banks have been saved thanks to huge guarantees and as well as liquidity. Interest rates have been dragged down to nearly zero. There are many who are optimistic about 2010 with a revival in growth. Others are sure that the worst of the crisis is yet to surface. The big question is about who is correct.
The unfolding drama has clarified certain things. Through 2007 to 2009 two simultaneous fronts have been tackled – one relating to finances and the other to climate. The financial mayhem resulted in a shift of power balance with G20 dominating over G7. The other was attempted to be sorted out at Copenhagen.
The two crises can be defined by two basic differences. The financial problem was mainly handled at the national level while the climate issue was tackled at the global level. The second point is that the financial mayhem had short term results that demanded immediate action while the climate issue ranged on long term effects where man did not suffer immediately and thus there was no reason for supporting reform. Thirdly the Copenhagen talks established the swing in power to the countries bulging with population – China, India, Brazil as well as South Africa – the latter having brokered understanding with USA.

While doing all this there was lot of hot feeling and sentiments oozing out at Copenhagen. The African chairperson of the developing countries claimed that the funds offered by the developed world for the climate problem was just sufficient for the purchase of coffins. But the dead do not worry about changes in climate. The problem is for the living; so all the talk was about those who are breathing.

Copenhagen was without doubt not without some sort of success despite the mess and frustrations. Globalization has taken on a new meaning and will not have the same connotation as of yore. However belated, however fuddled there has been a global recognition to the danger of climate change. But the great divide between the developed world and the rest remains as wide and yawning as ever.

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