Overview of the decade of financial crisis in the world

The detrimental effect of the world financial crisis beyond that on the GDP level and on the GDP growth rate has been felt with even greater intensity in the deterioration of employment rates, investment share in the GDP, in the increasing risk of poverty, and increasing income inequality. This has diminished the welfare and growth capabilities of these economies during the decade.

2. For the overall magnitude of GDP in constant prices China surpassed EU28 in 2015 and the USA in 2013; for the overall gross capital formation China surpassed EU28 in 2012 and the USA in 2010. The two opposing directions: the decline in the Triad and the high growth rate in China, changed the ranking between them, currently being 1. China, 2. EU28, 3. USA. 

However, one should add that the level of GDP per capita (as distinct from the overall GDP level) in the Triad is still much higher than in China. Yet, as an effective developing country, China is progressing fast also in this respect.

3. In addition to the usual statistical measures, such as percentages and growth rates, we shall describe the severity of the great recession with statistical measure S-time- distance, which measures distance in time (e.g. years) when the same level of the indicator has been reached. The time distance methodology is available in the large study (Sicherl, 2011a) and on www.gaptimer.eu. The paper (Sicherl, 2011b) published by the OECD Statistics Directorate can be freely downloaded from OECD at http://dx.doi.org/10.1787/5kg1zpzzl1tg-en. It can show how much time has been needed for the indicator to recover to the level before the crisis. The results are: to regain the 2007 level of GDP per capita, Japan needed 6 years, the USA 7 years and EU28 8 years; for the employment rate EU28 needed 8 years, while in 2015 the USA is still below its 2007 level; for the investment effort as the share in GDP the 2006 level has not been yet recovered in Triad: a delay of more than 10 years. This gives politicians and especially the general public unambiguous message that the financial crisis resulted in lost growth potential in this field for more than a decade. 

4. While the 2015 and 2016 values of GDP per capita were in all three economies higher than the pre-crisis levels, the situation on the of investment effort is completely different; the investment shares in GDP were distinctly below their respective pre-crisis levels. It seems that the damage done by the financial crisis has in this respect meant a delay of a decade or more.

The speed of change was swift. For gross capital formation in constant prices China surpassed the value of the USA in 2010 and the value of EU28 in 2012. In 2006 the magnitude of investment in China was still more than 50% lower than in the USA and EU28. In terms of time distance the 2006 value for China was reached in Japan 10 years earlier, 18 years earlier in the USA and more than 30 years earlier EU28. With great speed China reached the value of the USA in only 3 years and that of EU28 in 6 years.

Closing remarks

After slow recovery, growth may be picking up but we need to know where we start from. The fundamentals need to be improved. As the quality of financial regulation has not improved substantially on either side of the Atlantic, these domains are prone to further deterioration anywhere in the world. Even more so, possible further financial crisis could come around if these financial institutions are not properly regulated.

FULL TEXT: 

FULL TEXT: 

List of 30 selected indicators

It uses innovative time matrix presentation format that enables such condensed summary visual presentation over many countries and over time. Secondly, 30 selected indicators from many Eurostat indicators systems like Quality of life; Sustainable Development Indicators, Digital Agenda, Headline Indicators, etc. follow the orientation of Beyond GDP. Annex A1 provides Time Matrix Calculator to calculate time matrix for your own data. 

The 30 time matrices give rich food for thought and imagination of readers can find numerous comparisons and stories in the material. One of them is that the damage done to countries by the world financial crisis is seen in a much greater scale when we look for 28 countries beyond GDP and look at employment, investment share, risk of poverty, income distribution, health, etc.

While media and also official organizations are focusing on discussion of GDP growth rate, such orientation understated the severity of the crisis.

Other domains showed a more difficult situation:

•  employment rate fell in 20 EU countries;
•  in all 28 EU countries without exception share of gross investment in GDP decreased;
•  risk of poverty as percent of total population increased in 24 EU countries;
•  income distribution worsened as Gini coefficient and income quartile share ratio increased in 25 EU countries;
•  healthy life years at birth decreased for males and females in 15-18 EU countries.

The voyage through 30 time matrices for 28 countries compressed a very large amount of data, expressing multidimensional nature of development and well-being, indicating both visually and in numbers that very large differences exist between EU countries with respects to levels and dynamics. Using the innovative approach of time distance methodology the telling power of S-time-matrix provided a good summary overview at-a-glance over many domains with clear understanding to decision-makers as well as to the general public. Seeing with new eyes creates new knowledge and better understanding.

FULL TEXT: 

• World Inequalities in HDI (1980-2012).pdf
• Knowledge Economy Network: KEN Brief, No. 3 - World Inequalities in Human Development Index.pdf
• Human Development Index (HDI) in Time Distance Perspective 1980-2012: Summary by groups
• Human Development Index (HDI) in Time Distance Perspective 1980-2012: Summary by countries