1. REFLECTIONS ON THE GLOBAL CRISIS OF 2008 AND ITS POSSIBLE
ECONOMIC, SOCIAL AND GEOPOLITICAL SCENARIOS
Fernando Alcoforado1
ABSTRACT
This article aims to trace the social and economic scenarios and the global geopolitical
changes resulting from the economic and financial crisis of 2008. The methodology
adopted was the analysis of publications related to the economic and financial crisis of
2008 and its developments. The results of studies indicated that the economic and
financial crisis of 2008 will have long duration and that it would result in the decline of
the United States and the rise of China as a major economic power in the world.
Keywords: Origins of the global financial and economic crisis of 2008. Scenarios of
the world economy. Scenarios in the social world. Geopolitical future.
1. Origins of the global economic and financial crisis of 2008
In early August 2008, there was a financial crisis in the mortgage lending industry in the
United States, who immediately spread to other parts of the world financial system, with
a speed and magnitude that surprised the market. According to Gillian Tett2 (2009), the
major Western banks threw the world into recession. The Bank of England says that the
losses of the banks that had to readjust their investments to market prices are $ 3 trillion,
equivalent to about one year's economic output in the UK. The Asian Development
Bank, meanwhile, has estimated that financial assets worldwide might have been
dropped by 2009 to more than $ 50 trillion - a number equivalent to the world total
annual production.
According to Gillian Tett (2009),
1
Alcoforado, Fernando, engineer and doctor of Territorial Planning and Regional Development from the
University of Barcelona, a university professor and consultant in strategic planning, business planning,
regional planning and planning of energy systems, is the author of Globalização (Editora Nobel, São
Paulo, 1997), De Collor a FHC- O Brasil e a Nova (Des)ordem Mundial (Editora Nobel, São Paulo,
1998), Um Projeto para o Brasil (Editora Nobel, São Paulo, 2000), Os condicionantes do
desenvolvimento do Estado da Bahia (Tese de doutorado. Universidade de Barcelona,
http://www.tesisenred.net/handle/10803/1944, 2003), Globalização e Desenvolvimento (Editora Nobel,
São Paulo, 2006), Bahia- Desenvolvimento do Século XVI ao Século XX e Objetivos Estratégicos na Era
Contemporânea (EGBA, Salvador, 2008), The Necessary Conditions of the Economic and Social
Development-The Case of the State of Bahia (VDM Verlag Dr. Muller Aktiengesellschaft & Co. KG,
Saarbrücken, Germany, 2010), Aquecimento Global e Catástrofe Planetária (P&A Gráfica e Editora,
Salvador, 2010), Amazônia Sustentável- Para o progresso do Brasil e combate ao aquecimento global
(Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2011) and Os Fatores Condicionantes do
Desenvolvimento Econômico e Social (Editora CRV, Curitiba, 2012), among others.
2
Gillian Tett, PhD in social anthropology from Cambridge University, is assistant editor of the Financial
Times where does global coverage of financial markets.
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2. the current crisis is a product of changes that are quietly taking root in the West for several
years. Half a century ago, banking activity appeared to be a relatively simple art. When
commercial banks extended loans, they typically kept those operations within their own
accounting systems - and they used rudimentary calculations (combined with information
about their customers) when deciding whether or not to lend. But the seventies onwards,
two revolutions occurred: banks started to sell its credit risk to other investors in the
prosperous capital markets and adopted complex computer-based systems to measure credit
risk that were often imported sector of pure science - and the statistics produced by
luminaries such as Den Braber RBS.
not only the financial system is loathing damage on a scale that no one ever foresaw, but
the pillars of faith on which the new financial capitalism were built also virtually collapsed.
That made all the finance ministers to central bankers, retail investors and pensioners stay
devoid of an intellectual compass, bewildered and confused. "Our world is broken - and I
honestly do not know what will replace it. A compass by which we conducted the United
States disappeared," says Bernie Sucher, head of operations of Merrill Lynch in Moscow.
"The last time I saw something like that in terms of sense of disorientation and loss, was
among my friends in Russia when the Soviet Union collapsed."
until the summer of 2007, most investors, bankers and governments believed that these
revolutions represented "progress" that benefits the real economy as a whole. Regulators
loved the fact that banks are extending credit exposures, since crises such as savings and
loans in the United States in the eighties, demonstrated the dangers of banks being exposed
to a concentrated type of loan. "The dispersion of credit risk has helped make the banking
and financial system more resilient," the International Monetary Fund (IMF) proclaimed in
April 2006 expressing a widespread western belief.
as innovation in the financial sector became more intense, it also happened to be permeated
with a terrible irony. In public, the financial experts at the forefront of the revolution
portrayed the changes as measures that would promote a superior form of free-market
capitalism. When a team of JPMorgan created credit derivatives in the 1990s (a contract
between two parties set which define future payments based on the behavior of prices in an
active market, usually called "commodities"), a keyword favorite in its market literature
was the assertion that these derivatives would promote "market completeness" - or more
perfect free markets.
In July 2007, blind faith began to suffer cracks. In the United States defaults began to
increase in the mortgage industry "subprime" which is a credit risk, granted to a
borrower who does not offer sufficient guarantees to benefit from more favorable
interest rate (prime rate) or to designate a form of mortgage for real estate intended for
borrowers who pose the greatest risk. This mortgage was to guarantee the borrower's
residence and was often attached to the issuance of credit cards or car rentals. Agencies
such as Standard & Poor's cut the ratings of products linked to mortgages and admitted
that their mathematical models were presenting defects.
But when the default rate of "subprime" rose, accountants demanded that banks revalue
the instruments used. By the spring of 2008, Citi, Merrill and UBS had embittered
collectively a loss of $ 53 billion. Gillian Tett (2009) argues that banks tried to plug this
hole with getting more than $ 200 billion in new capital. But the hole kept growing. As
a result, faith in the ability of regulators to monitor banks collapsed. Faith in banks also
2

3. ended. Then, when the mathematical models lost credibility, investors despised all
forms of complex finance.
In September 2008, the last pillar of faith collapsed. Most investors admitted that the
U.S. government would never let a large financial group fail. But when Lehman
Brothers went bankrupt, distrust and bewilderment increased exponentially. Most of the
credit markets collapsed. The prices went crazy. Banks and analysts assets found that all
their financial models disintegrated. "In the capital markets, nothing worked," says
principal analyst risks of a major western bank. As noted a few weeks later Mervyn
King, governor of the Bank of England, "the system was on the precipice".
According to Gillian Tett (2009),
while currently seeking new pillars of trust for finance, governments are stepping in to
replace many functions of the market. The U.S. Treasury is conducting "stress tests" on
banks, in order to increase investor confidence. In the UK the government is providing to
banks against collateral assets "toxic." Banks and credit agencies are - belatedly -
revamping its models. The financial and regulators also promised to make the industry
more transparent and standardized.
Gillian Tett (2009) asks how the world got here?
A large part of the answer is that the era of liberalization contained seeds of its own
downfall: this was also a period of tremendous growth in the scale and profitability of the
financial sector, of frenetic financial innovation, of growing global macroeconomic
imbalances, high indebtedness households and asset price bubbles, ie, a deviation in the
price of the same or just an exaggeration on the part of investors who would be willing to
acquire assets for prices inconsistent with the cash flow that these assets generate
promising. By intervening to keep their exchange rates low and accumulate foreign
currency reserves, governments of emerging economies generated huge current account
surpluses, which recycled, together with inflows of private capital outflows in official
capital. Between the late '90s and the peak in July 2008, only currency reserves in emerging
countries grew by $ 5.3 trillion.
These huge flows of capital, combined with the traditional surpluses of several rich
countries and the growing surpluses of oil exporters, largely ended in a small number of
rich countries and particularly the United States. At the peak, the United States absorbed
about 70% of surplus spared from the rest of the world. Meanwhile, within the United
States, the ratio of household debt to GDP rose from 66% in 1997 to 100% a decade
later. Increments even greater indebtedness of households occurred in the UK. These
increases in the debt of households were supported in turn by financial systems highly
resilient and innovative and, in the U.S., by government programs.
Gillian Tett (2009) states that
we are witnessing the financial crisis deeper, broader and dangerous since the 1930s. As
Profs Reinhart and Rogoff argue in another paper, "banking crises are associated with
profound declines in output and employment." This is due in part to the balance sheets
extended beyond the limit: in the United States, the overall debt reached a record peak of
just under 350% of GDP - 85% of it private. This compares to just over 160% in 1980.
3

4. Among the possible outcomes of this shock are immense and prolonged fiscal deficits in
countries with large external deficits, as they try to keep up with demand, a protracted
global recession, a brutal adjustment of the global balance of payments, a collapsing dollar,
rising inflation and protectionism. The transformation will surely be in deeper financial
sector itself.
According to Gillian Tett (2009), the bright new financial system - for all its talented
participants, for all its rich rewards - has failed the market test. In a recent paper,
Andrew Haldane, executive director for financial stability of the Bank of England,
shows how little banks understood the risks they were supposed to administer. He
ascribes these failures to "disaster myopia" (the tendency to underestimate risks), a lack
of awareness of "network externalities" (contamination from one institution to others)
and "misaligned incentives" (the upside to employees and the downside to shareholders
and taxpayers).
Gillian Tett (2009) further states that
after the crisis, we certainly "see a financial sector less proud." The markets impose
discipline brutal, even if temporary. Government regulation also harden. Less clear is
whether policymakers will contemplate structural solutions with a separation of commercial
banking from investment banking or a forced reduction of the size and complexity of
institutions deemed too big or too interconnected to fail. It is also possible to imagine a
return of much of the domestic banking market, as governments increasingly turn their
cards. In this case, there would be a "deglobalization".
Another conclusion Gillian Tett (2009) is that the financial collapse would trigger a
global industrial slowdown. The slowdown is also spreading across significant sector of
the real economy, much of which is crying out for assistance and that the search for
security will strengthen political control over markets. A change of policy means
favoring a shift to national and far from global. This is already evident in finance. Also
seen is the determination to rescue national producers. But protectionist intervention is
likely to extend far beyond the cases seen so far is just the beginning.
Paul Krugman3 (2009) states that,
the fact is that recent economic numbers are daunting, not just in America but around the
world. The manufacturing sector, in particular, is plunging everywhere. Banks are not
lending, businesses and consumers are not spending. We will spare no words: it looks a lot
like the beginning of the second Great Depression.
The French economist François Chesnais4 (2008) states that the effect of the financial
crisis on the real economy hit emerging markets harder than the developed economies,
with the collapse of trade flows and a dramatic drop in the prices of "commodities". It is
3
Paul Krugman, economist, columnist for The New York Times, Professor of Economics and
International Affairs at Princeton University, is the holder of the Nobel Prize in Economics in 2008.
4
François Chesnais, specializing in industrial economics and economics of technological innovation, a
member of the Research Laboratory Larea-Cere at the University of Paris-X Nanterre and professor at the
University of Paris XIII-Villetaneuse, was an economist at the Directorate of Science, Technology and
Industry (DSTI) of Organisation for Economic Cooperation and Development (OECD).
4

5. clear that those hardest hit will be the poorest, especially in Africa, that have less to tell.
After these, the hardest hit will be the producers of "commodities" that always faced
great demographic and social problems, such as high-energy (Russia, Iran, Nigeria and
Venezuela). Even the oil-producing Gulf was affected. Everyone got used to export and
high revenues are facing adjustments.
Gillian Tett (2009) states that
the ability of the West in general and the U.S. in particular to influence the course of future
events is also compromised. The collapse of the Western financial system, while China
flourishes, marks a humiliating end to the "unipolar moment", ie the domination of the
United States. While Western policymakers face difficulties, their credibility is ruined.
Who still trusts the teachers? These changes will endanger the world's ability to manage not
only the global economy but also to deal with the strategic challenges represented by fragile
states, terrorism, climate change and the rise of new great powers. In the end, the
integration of the global economy in which almost all now depend can be reversed.
Gillian Tett (2009) argues that the era of financial liberalization over. But unlike the
1930s, there is no alternative in sight for the market economy. According to Tett (2009),
to know the direction of capitalism, it is imperative to understand more clearly what
went so wrong with the financial system of the 21st century. Certainly no lacks of
potential culprits are: unbridled greed, devoid of rigor regulations, monetary policies
overly flexible, fraudulent loans and managerial failure.
All this played a role - as occurred in earlier periods of prosperity and crisis. Another
issue that influenced the crisis was the extraordinary complexity and opacity of the
modern financial system. In the last two decades, a wave of innovation has reshaped the
way markets work, in a way that seemed to result in great benefits for all parties. But
this innovation became so intense that hit the ability to understand the most common
bankers - not to mention regulators.
Michel Chossudovsky5 (2009) asserts that
the reading of books by Paul Jorion - Vers la crise du capitalisme américain? - And Aglietta
and Berrebi (Désordres dans le mondial capitalisme. Paris: Odile Jacob, 2007) is very
useful. The first allows us to understand why it was almost inevitable that the clash
occurred in the U.S. mortgage industry.
Paul Jorion takes a look well on severe financial practices he does not hesitate to
characterize as almost permanent and inherently fraudulent, even where, as in Enron, did
not open any criminal proceedings. Aglietta and Berrebi, in turn, explain how the current
phase of capitalism can only generate, at close intervals, financial crisis whose epicenter is
the United States.
One of the major problems faced by the world capitalist system is the need of expansion
of demand to sustain the production of goods and services. Chossudovsky (2009) asserts
5
Michel Chossudovsky, Canadian economist, a visiting professor at academic institutions in Europe,
Latin America and Southeast Asia, has acted as economic adviser to developing countries and as a
consultant to international organizations.
5

6. that
to maintain a high level of activity on the planet, "is needed demand dynamics." At least for
now, she does not come from emerging countries (China, India, Brazil), where the
distribution of income and the relationship between city and countryside stunt the growth of
domestic consumption and the external surpluses which shall finance the deficits of the
United States . The demand cannot have as wage incomes rise, where growth is weak. She
comes from income distributed to shareholders and the ruling elite, but its mass is
insufficient to sustain global aggregate demand growing fast. The answer to this dilemma
lies in the power of credit expansion. This is where contemporary capitalism is the demand
to perform the requirements of shareholder value.
The French economist François Chesnais (2008) states that
one of the means used to overcome the limits of the capital of the central economies was
that they all resorted to creating completely artificial forms of expansion of effective
demand, which, added to the other forms of creation of fictitious capital, generated the
conditions for the crisis financial that is developing today.
for Marx, the fictitious capital is the accumulation of securities that are "shadow
investment" already made but that as titles and bonus shares appear in the form of capital to
its possessors. They are not for the system as a whole, for the accumulation process, but
they are for their owners and, under normal closing procedures for capital growth, yield to
their owners dividends and income. But his fictional character reveals itself in crisis
situations. When befall crises of overproduction, companies break, etc, warns that if capital
did not exist.
is due to the fictitious capital that can sometimes read in the newspapers that this or that
amount of capital has disappeared somewhere "jolt the market." These sums had never
existed as capital itself, though, for the owners of these shares, representing securities that
were entitled to dividends. A major problem today is that in many countries pension
systems are based on fictitious capital, with claims of profit of a capitalist production that
can disappear in moments of crisis.
the process of liberalization and globalization of the financial years 1980 and 1990 was
based on the accumulation of fictitious capital, especially in the hands of investment funds,
pension funds, financial funds. And the great news since mid or late 1990s and throughout
the 2000s was, in the United States and in Britain in particular, the extraordinary impulse
that gave creation of fictitious capital in the form of credit. Credit to businesses, but also
and especially housing credit, consumer loans and mortgages in bulk.
this contributed to a leap in the mass of fictitious capital created, causing even more acute
forms of vulnerability and fragility, even in the face of smaller shocks, including the front
episodes absolutely predictable. For example, we knew that a "boom" ends inexorably
estate and stock market existed in the illusion that there was no limit to the high price of the
shares. Based on all the history we knew that expansion would not be sustainable nor in
real estate or the stock market. When it comes to buildings and homes and the stock market
is inevitable that the time comes when the "boom" is over.
the end of prosperity, it was a normal and predictable, has become a tremendous crisis.
Added to all this the fact that during the last two years, the loans were made in the United
States to families with no ability to pay. And besides, everything was combined with the
6

7. new "techniques" financial thus allowing banks to sell bonds in such a way that no one
could know exactly what I was buying into the massive explosion of "subprime" in 2007.
François Chesnais (2008) raises a big question whether, in the short term, domestic
demand in China may become the place that guarantees that moment of realization of
surplus value (rate of exploitation, according to Marx, which is the difference between
the value produced by labor and the wage paid to the worker) that occurred in the
United States. The accumulation of capital in China was made based on internal
processes, but also based on something that is well documented, but little discussed: the
displacement of a huge part II Sector of the economy, the sector of the production of
consumer goods, from U.S. to China. And this has much to do with the volume of U.S.
deficits (the trade and fiscal) that could reverse only by means of a re-industrialization
of the United States.
This means that new relationships were established between the United States and
China. This is no longer over the relations of an imperialist power with a semi-colonial
country. The United States created new type of relations, who now have difficulties to
recognize and take. Based on the trade surplus, China accumulated millions and
millions of dollars, which lends to the United States soon. International relations are of
an entirely new type.
In Europe there is a clear trend towards accelerating the destruction of productive forces
and jobs to move to the only haven of the capitalist world today that is China. In China
occurred internally a process of competition between capitals, which combined with
competition processes in Chinese political apparatus, and competition to attract foreign
companies, which resulted in a process of creating huge production capacity. Besides
the ability to violate the nature on a massive scale, also in China focuses a
overaccumulation of capital at a given time will become unsustainable.
According to Chesnais (2008), the phases are distinct from the crisis of 1929, because
the crisis of overproduction in the United States was found from the first moments. Just
as happened with the 1929 crisis and in 1930, albeit in different forms and conditions,
the crisis will combine with the need for capitalism, a complete reorganization of the
expression of their relations in the context of global economic forces, marking the
moment when the United States will see that their military superiority is only one
element, and an element quite subordinate to renegotiate its relations with China and
other parts of the world. Or the time will come in which will jump to a military
adventure of unpredictable consequences.
Chesnais (2008) also notes that
we face the risk of a catastrophe, but it is not capitalism, but a disaster of humanity. In a
way, if we take into account the climate crisis, possibly something like this already exists.
occurred in 2008, a real break that leaves behind a long phase of expansion of the world
capitalist economy, and that this breach was the beginning of a process of crisis with
features that are comparable with the 1929 crisis, although it may develop in a very
7

8. different context. We are facing one of those moments when the crisis comes to express the
historical limits of the capitalist system.
entered a phase where it is placed the real possibility of a crisis of humanity within complex
relationships where the events are also warlike, but the most important is that, even
excluding the possibility of a large-scale war in which this could only be a atomic war, we
are facing a new kind of crisis, a combination of this economic crisis that began with a
situation in which the nature, treated without the slightest consideration and struck the man
in the framework of capitalism, now reacts brutally. This is something almost excluded
from our discussions, but it will impose itself as a central fact.
the process of liberalization and deregulation carried out in the world, with the
incorporation of the former Soviet camp and the incorporation and modification of
production relations in China meant the dismantling of the few regulatory elements that
were built in the world to come out in March of World War II, to enter a totally unregulated
capitalism. Not only unregulated, but a capitalism that actually created the world market in
the full sense of the term, transforming into reality what was for Marx an intuition or
anticipation.
Chesnais (2008) advocates the thesis that
during the last fifteen years have developed in certain parts of the system, industry groups
able to integrate themselves as full members oligopolies world. Both in India and in China
conformed true and strong capitalist economic groups. And financially, as an expression of
pure rent-seeking and parasitism, the so-called Sovereign Wealth Funds (financial
instrument adopted by some countries that manage the huge foreign exchange reserves of
exporting countries that had multiplied its revenues so formidable in recent years and has
been used in most cases, to acquire stakes in foreign companies with strategic and financial
goals) became important points of centralization of capital in the form of cash, which are
mere satellites of the United States, have their own dynamics and strategies and modify
many ways geopolitical relations of the key points in the life of the capital is made and will
make.
Chesnais (2008) opines that we are facing an imminent danger. The fact that all this
happens after such a long period without parallel in the history of capitalism, the
accumulation of 50 years of uninterrupted (except a tiny break in 1974/1975), as well as
all that the capitalist ruling circles, and in particular central banks learned from the 1929
crisis, all this makes the crisis go quite slow.
Central banks and governments can proclaim that agree with each other and cooperate
to prevent the crisis, but Chesnais (2008) does not believe that one can introduce global
cooperation in space turned into the scene of a tremendous competition between
capitals. And now, the competition between capitals goes far beyond the relations
between the capitals of the oldest parts of the world system and developed with the least
developed sectors under the capitalist point of view. Because in very particular ways
and even parasitic, gave up on the world stage processes of centralization of capital
outside the framework of traditional imperialist centers: in relation to them, but also in
conditions that introduce something totally new on the world scene.
8

9. 2. Scenarios of global economy
Occurred in 2008, a real break that leaves behind a long phase of expansion of the world
capitalist economy and that this rupture marked the beginning of a process of crisis with
features that are comparable with the 1929 crisis, although that may develop in a
context very different. Just as in 1929, banks were at the epicenter of the crisis, and
earlier this year it seemed that many of them could fail like Lehman Brothers or be
nationalized, as it did with some of them. This picture was reflected in a sharp drop in
the stock, a record rise in "spreads" risk on loans, including the interbank lending, and a
flight to government bonds.
The year 2009 began with the threat of new economic depression that the world
economy faced since the 1930s. The world capitalist system not only went into
depression after the 2008 crisis thanks to government interventions performed
worldwide. Unlike what happened in the 1930s, the public reacted quickly to the fall in
demand and private credit, expanding its activities with spending packages, tax breaks
and ample credit supply, including by central banks such as the U.S. , the euro area and
the UK. Along with Japan, these countries also started the year with interest rates close
to zero. In China, the government not only adopted a major tax package, such as
expanded credit on a scale never before recorded.
The financial collapse of the world capitalist system sparked a global industrial
slowdown in 2009. She is also spreading throughout the real economy, much of which
is still crying out for assistance. The search for security is strengthening political control
of national states over markets. The world ends 2009 with the global economy into
recession accounting for very large accumulated losses. In its forecast, the International
Monetary Fund (IMF) predicted that in 2009 the world GDP would fall and
international trade would contract as indeed happened.
The year 2010 was a year with unemployment rates still high in the global economy and
with above normal volatility in global financial markets. With world GDP growing
below potential, job creation was insufficient to absorb all the unemployed and new
entrants in the labor market. Doubts about the financial health of companies,
particularly banks, and, increasingly, public accounts are still many. The persistent high
unemployment worldwide and a low growth of the world economy may even threaten
globalization itself.
The fundamental weaknesses of the global financial sector have not yet been resolved.
Questions also remain about the functioning of the international monetary system based
on the dollar whose value is falling, the correct targets for monetary policy, the
management of global capital flows, the vulnerability of the economies of emerging
countries, as demonstrated in central Europe and eastern, and also financial fragility
demonstrated over the past three decades. They are still waiting for a solution to the
problems associated with regulation of the world economy. Without this adjustment, the
world capitalist system will always be subject to successive crises.
9

10. There is much speculation as to the future evolution of the global economy. Some
analysts have advocated the thesis that the world economy would have an evolution in
"V", ie present at first recession with fall in which growth resumed happen immediately
after reaching the lowest point. Others considered the growth in "U", ie with the
recession would fall in economic growth followed by a long period of depression which
occur after the resumption of growth and the most pessimistic, advocated an evolution
in "L", ie there would be no recession followed by depression growth perspective. In the
latter case, the resumption of growth would only happen with the building of a new
world economic order.
Nouriel Roubini (2009) presented a new form of evolution of the world economy, "W"
in his article "Growing the risk of further contraction." In this article, Roubini says,
There are two reasons why there is upside risk of a double-dip recession, in the form of W.
For starters, there are risks associated with exit strategies for great relaxation of monetary
and fiscal stimulus: the authorities are criticized for acting and also for not acting. If they
decide to take seriously the large fiscal deficits and enact tax increases, spending cuts and
reduction of excessive liquidity could undermine the recovery and lead to a recession and
deflation in the economy.
The newspaper Folha de São Paulo (2009) reported that the International Monetary
Fund (IMF) stated that the world has practiced out of the worst recession of the post-
World War II, but that a firmer recovery may require more time than anticipated.
According to the IMF the good news is that the forces that were pushing down the
global economy is losing strength. But the bad news is that it is too weak to force that
pushes us up, said the fund's chief economist, Olivier Blanchard, in announcing the new
provisions contained in the report "World Economic Outlook". This means that the IMF
advocated an evolution between "V" and "U" for the world economy.
The future of the world economy depends on the solution that is given to economic
relations between the United States and China, the gigantic public debt of the United
States, the recovery of the global financial system, the regulation of the global economy
and potential social unrest. The first problem that needs to be addressed is the economic
relations between the United States and China. This problem stems, on the one hand, the
fact that the Chinese monetary reserves being decisively financing the growth of the
U.S. deficit and on the other, the U.S. market represents the main destination for
Chinese exports. With the revenue generated by huge trade surpluses with the United
States - and policies that keep its currency artificially low - Beijing is the largest
investor in Treasuries U.S.
The apparent financial control of China on the United States has gained great
prominence. It should be noted that the accumulation by China of a huge foreign
exchange reserves ($ 2 trillion) is a side effect of an economic model too dependent on
exports. The huge trade surplus of China is the result of an undervalued Yuan that has
allowed other countries to consume Chinese goods at the expense of the Chinese
population itself. China cannot sell its Treasury reserves without triggering the collapse
of the dollar itself supposedly fears. A key aspect to consider is that the United States
10

11. adopts a policy of reducing their deficits would lead the country to buy fewer Chinese
products.
The summit between the Chinese government and the U.S. held in 2009 aimed to start
talks to seek joint solutions, despite disagreements over the currency, to the U.S. budget
deficit and the trade gap (exports - imports) between the two countries, among others.
The Obama administration has maintained the intention to focus on the difference in the
trade balance stressing that China should not count on American consumers to make the
global economy out of recession, because consumption of U.S. households were in
contraction. This means that China would have to necessarily boost domestic
consumption to keep its economic growth and contribute to a more rapid but more
balanced and sustainable global recovery.
The United States is facing a hefty current account deficit, making it the largest holder
of foreign debt in the world. If the United States does not reduce its spending, putting
into question the "American way of life", and begin pursuing smaller current account
deficits and lower trade balance surplus will have to enact a moratorium. It should be
noted that the obligations of the United States should add an amount exceeding $ 3
trillion. However, if the United States adopt a policy to reduce its spending, reduce
deficits and make its trade balance surplus would compromise international trade given
the weight of the U.S. economy. This means that, whatever the solution to the U.S.
economy, the current global crisis will continue advancing in the recession to
depression that is chronic. The evolution of the world economy would therefore be "L".
Martin Wolf (2009), the Financial Times columnist, wondered if "the world economy is
coming out of the crisis? The world has learned the right lessons? The answer to both
questions is, to some extent. We did some things right ones and learn some of the right
lessons. But not done enough nor learned enough. Wolf also says that we should put
these stories, however welcome they may be, in context. The worst of the financial
crisis may be behind us, but the financial system remains undercapitalized and carrying
a burden of doubtful assets still unknown. Rather, it is anchored by a massive explicit
and implicit support of taxpayers. The probability of injury to the front is close to 100%.
The capitalization of the financial system negatively impacts on the real economy by
inhibiting the financing of the productive sector and international trade. Many countries
are suffering sharp falls in export revenues due to the reduction in global demand
resulting from the global recession, but also as a result of the credit crunch for export. It
is feared that in each country attempt to stimulate its own economy in the current
associated with the adoption of protectionist measures, leading to a chain reaction. That
would reduce international trade, increase unemployment and would increase the crisis
in each country and globally. The search for advantages in each country would lead to
the worst scenario for everyone: the depression of the world economy. Many analysts
feared a repeat of what happened during the Great Depression in the 1930s. The return
of protectionism poses a serious risk to the continuity of the process of globalization.
11

12. Martin Wolf (2009) also claimed that behind the overcapacity and huge increases in
fiscal deficits was the disappearance of the consumer who spends too much, especially
in the United States. Prudence private sector probably endures in a post-bubble world
characterized by mountains of debt. Those expecting a quick return to business as usual
of 2006 are fantasizing. A slow and difficult recovery, dominated by deleveraging and
deflationary risks, was the most likely prospect. Fiscal deficits remain huge for years.
The alternatives-liquidation of excess debt through higher inflation or mass bankruptcy
will not be permitted. The high dependence on a huge monetary expansion and fiscal
deficits in countries that previously consumed much will be unsustainable in the end.
Wolf's view is that the evolution of the world economy would occur in "U".
According to Martin Wolf (2008),
the world is out private borrowers willing and creditworthy. The spectacular collapse of the
western financial system is a major symptom of this fact. In the short term, governments
will replace private sectors as borrowers. But this can not last forever. In the long term, the
global economy will have to rebalance. If the surplus countries do not expand domestic
demand relative to potential output, the open world economy may even break. As in the
'30s, this is now a real risk.
Analyzing the global economy, Chesnais (2008) found that
would need to find remedies for the saving rate. She is too low in some countries, in others
too high. The United States, where she became negative, and China represent the extreme
poles of this distortion. The reconstitution of a savings rate that failed to make the United
States a seat, if not the most immediate transmitter of financial crises "requires fiscal
consolidation inconsistent with the policy guidelines of the conservative majority in power.
Mainly involves a considerable upturn in household savings. This implies a revision
heartbreaking consumption on credit, combined with the horrifying waste of non-renewable
resources, which is the way of American life.
For Wolf (2009), the stronger demand growth in surplus countries, relative to potential
GDP, and is the most powerful global rebalancing, would be more healthy global
recovery. Will it happen? Wolf doubts. The persistent high unemployment and low
growth may even threaten globalization itself. The fundamental weaknesses in the
financial sector have not yet been addressed. Questions also remain about the
functioning of the international monetary system based on the dollar, the correct targets
for monetary policy, the management of global capital flows, the vulnerability of
emerging economies, as demonstrated in central and eastern Europe, and also the
fragility financial demonstrated so often and so painfully over the past three decades.
3. Scenarios in the social world
The main social problem resulting from the global economic and financial crisis of 2008
is unemployment that is already assuming gigantic proportions. The newspaper Diário
da Manhã in Brazil published an article by Marcos Cintra6 (2009) under the title
6
Marcos Cintra, Ph.D. in Economics from Harvard University, is professor and vice chairman of the
Getulio Vargas Foundation.
12

13. Desemprego no mundo e no Brasil (Unemployment worldwide and in Brazil). The text
of the article is as follows:
The International Labour Organisation (ILO) has produced the report "Global Employment
Trends" and it estimates that the global recession may generate in 2009, compared to 2007,
an additional unemployed people between 18 million and 30 million people, but that
number can reach 50 million if the picture continues to deteriorate.
The ILO report notes that in rich economies like the United States, Canada, European
Union, Japan, among others, additional unemployed will vary between 4 million and 11
million people. In East and South Asia unemployment could reach between 8 million and
26 million workers. In Eastern Europe, Middle East and Africa that quota would be
between 3 million and 10 million.
The ILO report does not provide data on the country, making him only to regions. In the
case of Brazil the information is contained in Latin America and the Caribbean, where it is
estimated that the unemployed may vary between 2 million and 4 million employees in
nearly 50 countries that comprise the region.
The ILO data show that the global economic turmoil started in the United States will have a
more devastating impact on the labor market in rich countries. In the United States, for
example, the number of unemployed today is 12.5 million people, and this number was just
over 7 million in 2007.
In Europe unemployment reached 8% in December last year, the highest in the past two
years, and the industry in Japan often announces job cuts and it is estimated that about
30,000 dekasseguis (descendants of Japanese immigrants in Brazil) return to Brazil because
of that.
The situation of the labor market in Brazil because of the global crisis is relatively good
compared to the rich countries of Europe, North America and Japan Unemployment worries
here, but the situation is more dramatic out there like designs ILO.
The federal government has been reorienting macroeconomic policy guidelines
strengthening the domestic market to offset the global downturn. But it´s necessary dispels
the environment that created extremely bad, and that increases the drama of Brazilian
workers, and seek alternatives to avoid job cuts.
An alternative that I put in debate could better distribute the impact of the crisis on the
productive sector. Instead of simply cutting jobs companies could negotiate with unions a
reduction in wages in exact proportion to the desired layoffs. If a company would have to
establish that they cut, for example, 20% of your payroll, this reduction would occur with
no layoffs, but through the reduction of wages in the same proportion.
Certainly, there would be a consensus among the workers who would rather keep their jobs,
even though receiving less than losing a job and living with zero income. Furthermore, the
trend is that even find another job, in a crisis, his salary for the same job would probably be
reduced.
The World Bank president, Robert Zoellick, told the newspaper El Pais (2009) in Spain
that there was a risk of "serious human and social crisis" because of the current
economic crisis, if not taken appropriate action in time. The holder of the World Bank
warned that the current situation was still unpredictable and it is best to "be prepared".
13

14. "What began as a great financial crisis and became a deep economic crisis, now is
drifting towards a major crisis of unemployment."
The holder of the World Bank has not rejected the possibility of a global economic
recovery, many authorities as the most developed countries have suggested. But he
cautioned that "recovery will be a low intensity for a long time," and added:
"Unemployment will continue to grow." "The probability of a great depression is low,
but not zero," he said.
The newspaper Jornal de Notícias (2009) in Brazil published text on 04/05/2009 under
the title Aumento do desemprego pode provocar crise social (Increased unemployment
can cause social crisis). This paper reported the following:
The President of the Eurogroup, also the prime minister of Luxembourg, Jean-Claude
Juncker, said that unemployment is growing up "disturbing levels". Finance ministers of
the euro area (Eurogroup) warned of the risk that the economic and financial crisis
affecting Europe brings with it a "social crisis" caused by the sharp rise in
unemployment.
At the end of the monthly meeting of the Eurogroup, your president, also prime minister
of Luxembourg, Jean-Claude Juncker, said that unemployment is growing up
"disturbing levels" and found that the region's governments must address "all their
efforts "to combat the situation.
Under the new economic forecasts published today by the European Commission, the
unemployment rate in the euro zone countries will grow to 9.9 percent in 2009, and
reaching 11.5 percent in 2010. Jean-Claude Juncker also asked "social responsibility" to
companies, warning that in the current context should avoid resorting to layoffs as a
cost-cutting measure.
The Eurogroup president stressed that one can not underestimate the "explosive nature"
that has increased unemployment and the problems it can cause, reminding that the
most affected by this element are the lowest social strata. At its meeting today,
dedicated almost exclusively to the analysis of Brussels new economic forecasts, the
leaders of the political economy of the Eurozone have agreed that at present no need for
further measures cyclical momentum in Europe.
Jean-Claude Juncker insisted that the effort that Europe has made to combat the crisis is
equivalent to the U.S. and reiterated that "no one sees the need to increase the volume"
of funds injected into the economy. The website Terra.com.br (2009) published the text
on April 22, 2009 under the title Crise financeira pode levar à crise social na Ásia, diz
OIT (Financial crisis can lead to social crisis in Asia, says ILO). The text is as follows:
The International Labour Organisation (ILO) said on Wednesday, in a meeting in Manila,
the Philippines, the international economic and financial crisis could bring the risk of a
14

15. social crisis in Asia, where the agency predicts that there will be 23.3 million unemployed
and more than 140 million poor this year.
"If we face a prolonged financial crisis, there is a danger of falling into a social crisis in the
region", said ILO economist Gyorgy Sziraczki, ILO, participants from 11 countries. The
Regional Director of the ILO Sachiko Yamamoto said in his speech, which is "a real
scenario" that tends to form with "a magnitude and rapidity astonishing" because the impact
of the financial crisis "is being felt deeply in countries industrialized and emerging Asia".
A study of this agency estimates that 23.3 million workers will lose their jobs this year and
will join the 90 million unemployed in the region that had the world in late 2008, and
provides "a dramatic increase in poverty over 140 million people in 2009. " The report
states that about 60 million workers in the formal sector to pass informal this year, with the
risk of lost wages and social protection.
The document highlights that Asia will spend 3.9% of their Gross Domestic Product (GDP)
and economic stimulus plans, however, Asian governments that are intended less money to
social protection worldwide. The report states that "the substantial economic slowdown will
lead to freezing or lower wages," and this situation will increase the potential labor
disputes.
The ILO urged the region's governments to act now to address these problems, and the
Asian Development Bank noted that any measure must include formulas to create jobs and
infrastructure that benefit the poor. The International Labour Organisation (ILO) said on
Wednesday, in a meeting in Manila, the Philippines, the international economic and
financial crisis could bring the risk of a social crisis in Asia, where the agency predicts that
there will be 23.3 million unemployed and more than 140 million poor this year.
The website Rumo Sustentável (2009) published text under the current crisis may be
more intense than that of 1929, says sociologist. In this paper, it´s presented an
interview with Ricardo Antunes, a professor at the State University of Campinas
(Unicamp) and an expert on labor market issues. In this interview Ricardo Antunes says
that companies, before the current crisis, reduced its workforce, through technological
upgrading and restructuring. The result was the growth of so-called structural
unemployment, which could greatly increase with the global economic crisis today.
For Ricardo Antunes economic crisis and financial crisis already has a devastating
outcome for the working class. The International Labour Organisation (ILO) has
forecast the new 50 million unemployed in 2009, which increased the number of
unemployed up to 340 million people worldwide. This figure was a conservative
estimate. Only China has announced that 26 million former peasants, who were busy
cities, lost their jobs. The tragedy that befell among workers is monumental, beginning
with immigrants in search of work in the countries of the northern hemisphere, but also
the working class in general, who was employed in the metalworking industry, textile,
food industry, etc. The first thing that business takes on the verge of a crisis is cutting
the jobs. It is emblematic that the United States, Britain and Japan live the highest
unemployment rate in decades.
15

16. Ricardo Antunes says the Brazilian government tried to sell us the idea, completely
false, that Brazil was immune to the crisis. The truth, however, is that at the end of
2009, Brazil had 640,000 new unemployed. Since then, data have improved, because
the government has taken measures such as reduction of the IPI (Excise Tax) of cars
and white goods to prevent the recession was harder. But these measures have short
breath. The Brazilian economy is much globalized. The Brazil relies heavily on foreign
markets because commodity. The outcome of the Brazilian crisis is very tied to the
outcome of the international crisis. We cannot have an illusion that Brazil is an island in
a turbulent sea pink.
4. Future geopolitical changes
Giovanni Arrighi (1996) states that there were four cycles of systemic accumulation of
capital during the evolution of capitalism as a world system: a Genoese cycle, from the
fifteenth century to the beginning of the seventeenth century, a Dutch cycle, from the
end of the sixteenth century elapsed until the largest part of the eighteenth century, a
British cycle, from the second half of XVIIII century until the early twentieth century,
an American cycle, initiated at the end of the nineteenth century and continuing to the
current phase of financial expansion. Also according to Arrighi, the Genoese regime
lasted 160 years, the Dutch 140 years, 160 years the British and American 100 years.
Giovanni Arrighi argues the thesis that, in each cycle of capital accumulation, the
expansion of trade and production in the beginning gave way in the end to a more
concentrated expertise in high finance, ie speculation and in financial intermediation.
This is the situation that prevails in the world economy today. According to François
Chesnais (2008), the crisis of the world capitalist system that erupted in 2008 has as its
other dimensions to mark the end of the stage in which the United States could act as a
world power without parallel.
According to Chesnais (2008), experienced a time when the United States, are being
subjected to the test. In a very short timeframe, all global relations of the United States
should not change, at best, reorder, and renegotiate all their relations based on the fact
that they will have to share power on a global scale. The era in which the United States
sought to impose their will on the international scene over. It is what is already
happening from the Obama administration.
There is an assumption in many parts of the world that the general crisis of the world
capitalist system, represented by the freezing of the financial system, accelerates the
long-term geopolitical shift, heralding the decline of American power and influence in
Europe. "The crisis emphasizes the fact that China is a key global player," said Bobo Lo
(2008). According to Bobo Lo, "it may still not be a superpower, but accelerated this
trend."
The newspaper Estado de Sao Paulo published on 21/11/2008 article under the title
Força dos EUA no mundo diminuirá, diz inteligência americana (Force U.S. decline in
the world, says U.S. intelligence). The text is as follows:
16

17. The National Intelligence Council of the United States, part of the security apparatus of
Washington, published an impressive prediction. The international system as developed
after the Second World War was, as expected, "unrecognizable" by 2025, thanks to
globalization, the rise of emerging powers and "a historic transfer of relative wealth and
economic power from West to East". This publication notes that "the next 20 years of
transition to a new system will be full of risks". "Strategic rivalries probably revolve
around trade, investments and technological innovation and acquisition, but we cannot
rule out a scenario of 19th century arms race, territorial expansion and military
rivalries".
This report was written before the full force of the financial and economic crisis
becomes real. However, the authors were convinced that the unipolar moment of
hegemony unchallenged U.S. after the fall of the Berlin Wall was already coming to an
end. The future would be multipolar world order. China moves towards becoming a
dominant player in an International Monetary Fund and World Bank strengthened.
China is currently the fastest growing country in the world, therefore, has excelled in
the geopolitical world.
China has exercised great influence political, military and economic in scenario of Asia
and internationally thanks to its large expanse of territory (ranked third in territorial
dimension on the planet), high number of inhabitants (about 1.3 billion, the most
populous of the world) and the dynamism of its economy (currently it is the economy
that has the highest rates of growth across the planet).
Meanwhile, the speed and boldness the global expansion of China following surprising
analysts and governments around the world. China is becoming the first non-white
society and not Europe that will become a superpower in political, economic and
military global. And all indications are that there will be no decrease in this trend. The
XXI century will see, certainly the largest consolidation of the national state of the Far
East, the People's Republic of China, as the largest economic power, political and
military world.
It seems that, in lieu of U.S. global hegemony, there will be short-term construction of a
multipolar world system under the joint leadership of China and the United States, a
framework of balance of power. This is because of the accumulation of capital in China
making based on internal processes, but also based on something that is well
documented that the offset is an important part of the sector of the production of
consumer goods, the United States to China. And this has much to do with the volume
of trade and fiscal deficits Americans.
But what happens in the bowels of China? In China occurred internally a process of
competition between capitals, which combined with competition processes in Chinese
political apparatus, and competition to attract foreign companies, which resulted in a
process of creating huge production capacity. This means that new relationships were
established between the United States and China. This is no longer over the relations of
17

18. an imperialist power with a semi-colonial country. Based on the trade surplus, China
accumulated millions and millions of dollars, which lends to the United States soon.
International relations are interdependent of an entirely new type.
The economic impact of China, and now India, with a combined population close to 2.4
billion people, is already evident. Only China's population is already larger than that of
Latin America and sub-Saharan Africa combined. In addition, the Giants are not alone.
The rise of China and also India as world powers is as significant as the U.S., Germany,
Japan and Russia occurred in the late nineteenth century. Historically, the rise of
emerging powers contributed to the intensification of economic competition and the
contradictions among the ruling classes of these countries triggering international
conflict as happened in 1914 with the outbreak of World War I and in 1939 with the
advent of the Second World War.
The rise of China and India could trigger international conflicts insurmountable as in the
past? The answer to this question depends on what might occur in an interdependent
economic relationship between China and the United States and the ability of both
countries have to manage the condominium world power under their leadership and
prevent the outbreak of international conflict. On the other hand, the emergence of
conflicts can occur if, under the current ruling powers in decline, political
destabilization occur resulting from the crisis of the world capitalist system and the rise
to power of political sectors fascists and warmongers difficult to solve by the
condominium world power led China and the United States.
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