How the Economic Boom of 1990s and 2000s Resulted in Debt, Environmental Destruction and Inequalities

The First Problem is Too Much Debt

The irrational exuberance in the economies of the west and throughout the world during the 1990s and the 2000s has created a host of problems that have to be addressed urgently now. These include creation of too much debt and unsustainable governmental borrowing among all the economies of the world. As all levels of society are heavily indebted, the resulting situation resembles a nightmare where the debts are coming due and they have to be repaid. Further, the economic boom of the 1990s and the 2000s was based on phantom wealth creation with no relation to physical growth. In other words, the economic boom of the last two decades was all about speculation and financialization rather than actual creation of real wealth. Of course, there was a lot of manufacturing activity as well but this was mostly in Asia, which exported all the goods and services made there to the west. The point here is that all western economies grew only because the central banks in those countries kept interest rates near to zero, which meant that it was profitable to lend rather than save.

The Environmental Costs of Business

The next problem that was created by the economic boom of the last two decades is that the resources of the world were depleted and exhausted with all the concomitant environmental problems that they entailed. In other words, the rampant exploitation of resources and the consequent disregard for the environmental costs has resulted in climate change, falling groundwater tables, and resource depletion. The point here is that economic activity is usually accompanied by environmental costs that economists and businesspersons dismiss as “externalities”. Suddenly, we can no longer avoid talking about these externalities because we have reached the tipping point as far as the capacity of planet earth to sustain growth is concerned. Therefore, many economists are now calling for businesses to account for environmental costs and not to dismiss them as being external to the operations of the businesses. However, this might be a case of too little too late as is evident from the super storms and the flooding of many countries because of rising sea levels brought on due to melting of the glaciers and the ice caps. We are also witnessing extreme weather variations with severe winters and equally severe summers. These are the environmental costs of the economic boom of the last few decades.

The Rising Inequalities and Popular Anger

The third problem that is societal and social in nature relates to the widening gap between the rich and the poor. This has already become a huge problem in the west where inequality is at levels that were never witnessed in history. This is leading to social unrest and popular anger and discontent at the prevailing injustices to the poor and the less privileged. The point here is that the economic boom of the last few decades resulted in the rich getting richer and the poor becoming poorer. No wonder countries in Europe are witnessing periodic strikes and chaos arising from the anger of the people. Further, all over the world, the popular protest is kicking off because those in the middle and lower strata of society have now realized that they are the victims rather than the beneficiaries and hence, need to take matters in their own hands if they have to live or even survive in the tough economic conditions prevalent now. In other words, the suffering and the deprivation that the masses are now undergoing is translating into mass protests and anger at the privileged classes.

Concluding Thoughts

Finally, all these three problems are interconnected as they have the root cause of excessive growth based not on fundamentals but on creation of phantom wealth. Now that this phantom wealth is dissipating, the world realizes that unless some urgent action is taken, it would be staring at an endless crisis that would continue forever.

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