TUBINGEN – Many say that the world financial crisis could not have been foreseen. Perhaps not by financiers and economists, but others who were watching how markets were developing – often with dismay – were more than worried.
As early as 1997, I warned about a repeat of the collapsed economic order of 1929-1933 in my book A Global Ethic for Global Politics and Global Economics : “The slightest remark, for example by the President of the American Federal Bank, Alan Greenspan, at the beginning of December 1996, that an “irrational exuberance” had led to an overvaluation of the financial markets was enough to drive the nervous investors on the high-flying stock markets of Asia, Europe and America into a spin, and panic selling. This also shows that crises in globalization do not a priori balance out, but perhaps get progressively worse.”
Back then, I was already venturing what is, for economists, a heretical presumption: that chaos theory should be applied to the economy; that devastating effects can follow from the smallest causes. One could by no means rule out “a return of the world economic crisis and the collapse of the world economic order of 1929-1933.”
So I was not at all surprised by the speed and dimension of events in recent months. Indeed, only a few economists – such as the 2001 Nobel economics laureate Joseph Stiglitz and the 2008 laureate Paul Krugman – warned against fatal developments that were mounting in the now globalized economy.