The economy of the last decade
The economics of the past ten years: From the dot-com bust and banking crisis to the consummation of globalization.
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What goes down, must come up, and then go back down again -- at least that's been the story of our economy over the past ten years. The bookends were the dot-com bust at the beginning of the decade, and the financial crisis and the great recession at the end of it.
"The dot-com bust was a huge financial bust, or asset bust," said Zanny Minton Beddoes at the "Economist." "I think one of the reason it slipped our memory is that the recession that followed it was incredibly mild. And that was in part, what caused the Federal Reserve -- then under Alan Greenspan -- to slash interest rates and really cushioned the economy. But in doing so, it sowed the seeds of the housing bubble, which then in turn, of course, became a driving force of the next financial crash, the big one at the end of the decade."
The rise of a global economic network also came to define the decade, and if the 80s were the beginning of the global economy, the 90s were the consummation of globalization.
"Now it's pretty much a household acronym to talk about the BRICs -- Brazil, Russia, India, China -- the big emerging economies," said Minton Beddoes. "That phrase, that acronym didn't even exist a decade ago. And that really symbolizes how these big emerging economies have come center stage to the global economy. And I think that's going to be -- in fact second only to the great recession -- that will be biggest milestone of this decade."
The strong growth of these emerging economies created the commodity price boom that was another defining feature of the decade. According to Minton Beddoes, oil prices really began going up in 2002-2003, and they've remained high through the big recession.
It was a better decade for the emerging economies than it was for the large economies, like the United States. While emerging economies saw a rise in standard of living, the US saw only moderate gains, with the middle class seemingly in peril.
"To the extent that there was growth this decade, it was growth that was very much credit driven, unsustainable," said Minton Beddoes. "Based on rising house prices, people cashing out and living beyond their means on the basis of that."
The public's perception of the economy, the fact that many now think about bank failures and bailouts, along with accounting measures and Wall Street, and the lessons learned from the financial crisis, also mark the last decade.
"The big lesson is that we need a growth model that is less debt-fuled, that is less bubble-based, and more based on real investment, real productivity gains, real re-orientation of the economy -- more towards exports," said Minton Beddoes. "A kind of more sober growth ... less binge-based ... but there's also another side to that, which is we need new customers and new people to buy American products and that has to come from greater demand growth in the big emerging economies."
The US in the past decade was the engine of global growth, with US consumer spending propping up the global economy. Minton Beddoes says in the new decade, we'll need new sources of spending growth from elsewhere.
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