The financial crisis of 2008 had a significant impact on the global economy, leading to permanent changes in various areas, including:
- Banking regulations: The crisis led to an increase in regulations for banks, including the Dodd-Frank Wall Street Reform and Consumer Protection Act in the US, which aimed to increase transparency and reduce risk in the financial system.
- Monetary policy: Central banks, such as the Federal Reserve, changed their monetary policy in response to the crisis, using quantitative easing and low interest rates to stimulate economic growth.
- Economic inequality: The crisis led to increased economic inequality, as the wealthy were more able to recover from the recession than lower-income individuals and communities.
- Trust in financial institutions: The crisis damaged trust in financial institutions and government regulators, leading to a decline in public confidence in the banking system.
- International cooperation: The crisis also resulted in increased international cooperation to address economic issues, with the G20 becoming a more prominent forum for discussing global economic policy.
The Playing Field
Inequality is perhaps the most interesting long-term effect because it is the likeliest to cascade into meaningful change. The recession that followed the crisis had a disproportionate impact on lower-income individuals and communities, who were less able to recover from job losses and wealth declines.
In the US, the top 1% of households saw their wealth increase by 37% from 2007 to 2016, while the bottom 90% saw their wealth decrease by an average of 4%. Similarly, the recovery from the crisis has been characterized by slow wage growth for most workers, while the incomes of the highest earners have grown more rapidly.
The trend of rising inequality is not limited to the US; it has been observed in other developed countries as well. The crisis also had a large impact on the developing world, where many countries saw a decline in economic growth and an increase in poverty. The crisis also led to the rise of unemployment and poverty for many people, creating more inequality. Overall, the financial crisis has had a lasting impact on economic inequality, with the recovery from the recession disproportionately benefiting the wealthiest individuals and households. The pandemic has only accelerated this trend, with the majority of all global wealth created in the last two years going to the billionaire class.