Almost ten years after the events began ordinary people in many countries are still suffering the consequences. If you are Greek they are a massive decline in your standard of living and unemployment rates higher for longer than those of the UK in the Great Depression of the 1930s. If you are British then you got a drop in your real wages for several years and George Osborne's huge cuts to public services.
George has been telling us with great frequency that the cause of all these problems is that one political party in the UK failed to fix the roof whilst the sun was shining. On one level he might have a point. After all Gordon Brown did keep telling us that he had put an end to boom and bust. In reality Osborne couldn't be more wrong. A global problem is not usually caused by the failures of one political party in a relatively small part of a world economy.
The problems of 2008 were down to one major factor. We have a world economy but we don't have effective world economic control and guidance of it. This means that it is out of control and liable to huge booms and slumps. Instead of governments which are trying to represent ordinary people being able to work together to manage economic affairs we see the opposite. The forces of an uncontrolled free market are too strong for national governments to be able to resist easily.
This can be seen to some extent in the decisions of multinational companies about where to locate and where to decide to declare your profits. They can follow the lowest wages, the worst working conditions and the lowest tax rates and do their manufacturing anywhere they choose to across the world. That is worrying enough but the freedom of financial companies to operate with limited controls and restrictions and to move their money about around the world in microseconds is much more important. It injects a volatility into the world which fundamentally changes the nature of the economic system.
Instead of industry trundling along doing much the same thing each day and providing people with steady but unspectacular jobs and incomes we have a systemic unpredictability at the heart of the economic system. Banks, insurance companies, hedge funds and the like operate on fleetness of foot. The first to detect a trend in the markets and the one that programmes its computers to respond most rapidly is the one that will make the most money. The slowest to respond is left holding assets that have badly declined in value. So there is a huge incentive to do what everyone else is doing.
If you don't buy when others are buying and if you don't sell when they are selling then you are a mug. This means that markets across the world are now very vulnerable to boom and bust. There is an inbuilt tendency for extreme reactions and for dangerous volatility. So 2016 started out with a massive sell off on the markets with the UK stock exchange dropping by 2.4% in a single day or 148 points. Once upon a time this would have been astonishing. Now it is viewed as almost a commonplace reaction to a relatively small change in predictions about manufacturing growth in China.
With instability built into the heart of the system sooner or later a crisis like that of 2007 and 2008 is highly likely to return. On a larger scale and with fewer tools in our kit bag to control it.
Instead of acting with other world leaders to try and plan to avoid this and to manage it when it occurs George Osborne has opted for the Gordon Brown solution. He is telling us he is fixing the economy whilst doing nothing about the fundamentals. George talks a very good game about fixing roofs whilst the sun shines but checkout what he has actually done to introduce effective management of the financial system and you will struggle to find any real hard practical measures.
Banks have been required to keep a higher level of reserves and to pass financial health checks. Not exactly onerous. In exchange they have been allowed to swop £375,000,000,000 of dodgy assets for money from the bank of England whilst the rest of us have been told there have to be cutbacks. Nothing has been done to stop them playing the markets and chasing the best profits around the world from behind computer desks in London.
When the financial crisis hit in 2008 it was discovered that banks had gambled more than the size of the whole world economy on financial products that were so complex that almost no one who was buying them knew what they had bought. All that mattered was that the banks believed they could get other people to buy them for a higher price. Individual traders made millions in rewards for their entrepreneurial behaviour and we were all asked to admire their skill in risk taking and to hope that some of their income would trickle down through the economy and help the poor.
When the banks discovered that they were holding worthless electronic signals their panicky offloading of every asset they could find was not enough to stop bankruptcy after bankruptcy and to force the state to come to their rescue.
Not one single senior banker has gone to jail for their actions. No taxes have been placed on financial transactions to try and ensure that they are about fundamentals instead of speculation. No new international agreements are being negotiated to try and ensure that banks are brought under control and a similar crisis can't happen again.
Instead banks are getting back to business as usual. They are inventing new complex financial instruments. They are once again programming their computers to automatically detect and respond to the slightest market movement. Their staff are still chasing bonuses by taking risks. They have been caught fixing LIBOR rates, helping money launderers and dodging tax payments. And their Chief Executives think that the appropriate way of dealing with this is to tell Osborne that he must be careful not to impose any restrictions on them or they will move their headquarters to Hong Kong.
In other words we are back to very high risk and no effective control. A fresh market collapse is therefore highly likely. If I could predict when it would happen, where it would start and how deep it would go I would be a very rich man. But I do think I can safely make this prediction. If it happens whilst George is still Chancellor he is going to find it very difficult to explain.
It is one thing failing to fix the roof whilst the sun is shining. It is another thing altogether to do nothing to sort it out when it has been raining hard and long for close on ten years and then to re-employ the same cowboy builders who left it so vulnerable to collapse in the first place.