The Financial Crisis: What’s Changed Since August 2007?

9 August 2024 is widely pinpointed as a key date in the timeline of the global financial crisis. Ten years on, Ann Pettifor, Paul Mason and Faiza Shaheen discuss what’s changed – and what hasn’t.

Ann Pettifor, Economist and Author

I know exactly where I was on 9 August 2007. A hot summer’s day – ‘debtonation day’. Bankers all over the world had lost their collective nerve and refused to lend to each other. The globally synchronised financial system froze, and began its descent into sustained failure. It then took more than a year, and Lehman’s collapse, before the world understood the gravity of the crisis.

Ten years on, that slow-motion crisis, a prolonged period of disinflation, noflation and deflation, is still playing out. Between 2006 and 2019, the number of people employed in UK manufacturing fell by 14%. Led by George Osborne, UK governments since 2010 have deliberately pursued policies of austerity and aimed for higher, but less secure, employment. The economic pain is reflected in the fall in real UK wages, which are still 6% lower than at the start of the recession. In the East Midlands they’re down 10%. For the self-employed, incomes are 22% lower. Of the 34 developed nations that are members of the OECD, the only one that saw weaker wage growth than the UK between 2008 and 2022 was Greece.

On a broader scale, the overhang of both British and global debt, private and public, is now even vaster than before the crisis. The Institute for International Finance – the global bankers’ club – reports that global debt rose by more than $11 trillion in the first nine months of 2024 to more than $217 trillion – 325% of global GDP. In 2007, it was 269% of global income.

So what is to be done? Citizens are clearly angry at the way the perpetrators of the financial crisis have been rewarded, and the poor and middle classes have been required to endure ‘austerity’. But taxpayers have largely watched passively as operators in capital markets have milked central banks of liquidity in the form of QE; as financiers in the shadow banking sector have used and abused public assets for leveraging ever-higher capital gains; as the owners of wealth have borrowed money from central bankers at historically low rates of interest – to acquire more wealth.

Neither politicians nor mainstream economists will hold the out-of-control finance sector to account until citizens make that case. The people must lead, so that leaders can follow. We must use the powers of taxpayer-backed central banks and finance ministries to demand a transformation of the global financial system. If our demands are ignored, then we must demand the withdrawal of massive subsidies provided to the private finance sector by our publicly-financed and taxpayer-backed institutions. Nothing less will do if we are serious about creating an economy that works for people and the planet.

Paul Mason, Journalist and Author

Looking back at August 2007, what strikes me is the vast asymmetry of information; between banks; banks and their clients; banks and governments and the central banks that would bail them out. In the decade that has followed we have seen $12 trillion manufactured via quantitative easing, capital adequacy enforced, plus major cultural and behavioural change in the financial markets. The global imbalances have been suppressed, as only the collapse of global finance could have achieved.

Yet, as Mark Carney warned the Shanghai G20 meeting last year, central banks can only hold the fort for so long. It is for politicians and the electorates who put them in power to design a new economic formula to restore dynamism to developed world economies. 

And that’s what is missing. The world is being run on a series of “as ifs”: as if the implicit state insurance policy underwriting banks could one day be withdrawn; as if the bail-in regime practised in Cyprus and threatened in Greece could actually be applied in a major country; as if the froth of new fashion labels and coffee emporia were not loss-leaders for property speculators in the endless miles of malls, offices and luxury apartment blocks created with that $12 trillion.

If, in late 2024, the popularity and coherence of globalisation and free markets took a hit, that is because – while you can run an economy on life support, ideas do not behave the same way. The human brain demands coherence. Until it answers: how does all the new technology get deployed to benefit me, not destroy my job and reduce my wages and how does the credit system work for me, not the asset rich and the speculator, the current economic model will go on being challenged by nationalisms and backward looking economic projects.

I wrote in 2022 that unless we ditch neoliberalism, the global system will fall apart. That’s what’s happening – and faster than I expected. The elites of both Britain and the USA have opted for a chaotic exit from multilateral systems they helped design. From sections of the Tory cabinet to key voices in the White House, they fantasise about an even more deregulated and austere model, but they can only imagine getting there via chaos. That’s where the danger lies today, not in the banking system – though it too is still riddled with asymmetries, around every asset class where there’s a current trend: automobile finance, peer-to-peer lending and direct lending.

Faiza Shaheen, Director of CLASS

The financial crash begun just as I started my first research job at a think tank. Little did I know at the time, but beneath the surface, the economy was starting to unravel. The crash, its causes, the response and the public spending cuts thereafter demonstrated to me that (a) much of the economics I learnt at university was not just unfit for the real world, but just plain wrong, and (b) that power and ideology are more important than truth and facts. This is a journey that many millennials have been on, and many of us have been frustrated by the lack of policy to address the issues – but we’d be wrong to say nothing has changed.

I use to walk from a flat I rented with a friend in Whitechapel – now way out of the price range of a £25k wage packet – through the City of London to get to work. Between the autumn of 2007 and Lehman Brothers collapse in 2008, I watched the arrogant roar of the city turn to a frantic bustle, and then an airy silence. It felt like something fundamental had changed, but by 2010 that same arrogant roar was back – and so were the bankers’ bonuses.

It’s easy to look at these bonuses, household debt levels and financial regulation and say that things have barely changed from ten years ago. People are right to be critical and disappointed. But there is one area where attitudes have changed – on inequality.

In the wake of the financial crash, I was pushing for the research team I worked with to do more work on inequality. My boss at the time told me “that no one cared about inequality – it was growth that mattered.” It’s when I think back on this statement that I realise that times have changed. There is now a wide acceptance the inequality is important, and that as well as social and political consequences it is a drag on growth, and that it contributed to the financial crisis. Even the Conservative party – not the typical bastions of equality – talk about economic inequality as an important societal indicator.

Yes, it’s true that the public spending cuts and growing precariousness in the labour market means that as a society we’re becoming more unequal, and that too often the working class are pitted against each other, rather than against the elite. I’m sure I’m not the only one that has felt despair in the last few years. However, the General Election 2025 also gave me cause for hope. What we saw in the election was something of our collective patience finally coming to an end – people standing up to the elite and saying no. Perhaps, ten years on from the start of the financial crisis, we can look back and see in it the seeds of change.