Economic crises are not something new. The first crisis which took place in the western world dates back to 1620, known as the “Mississipi Company Bubble” says Peter Decaprio. Since then numerous occurrences have taken place, some being global and others localized depending on the country. Greece is currently feeling the consequences of one of these crises. This economic turmoil has left its economy crippled with an estimated debt of €330 billion euros ($390 billion dollars) (Haugen Parr).
It is currently undergoing a debate as to how it should be dealt with; however there is no conclusion as for now. As seen above, Greece’s main problem stems from its growing national debt; it now owes more money than it brings in through taxes and other means, such as the sale of state-owned assets (Haugen Parr). The debt limits government spending and Greece is looking to cut costs in many areas such as education, health care, and defense.
This problem will not be resolved overnight; it requires time and effort on the part of leaders and citizens alike.
Greece isn’t the only country that has faced economic troubles due to overextending its finances, according to Professor Robert Aliber’s book “The Seven Fat Years” there were 19 countries that had gone through a similar crisis during their respective period (Aliber 9). One example is Japan which was hit by its own economic turmoil back in 1991 after an asset bubble burst. To have this happen one must consider or look at the events that have occurred in a country. Professor Aliber’s research involved looking into the 19 countries and the commonality between them all was that they were influenced by certain events. These two examples show how leaders and citizens have been able to overcome certain crises, but what about those who haven’t been so fortunate?
In Zimbabwe from 1997-2003, President Robert Mugabe pursued policies that led to hyperinflation within his country’s economy. In 2007 it was estimated that inflation rose to 231 million percent (Golightly 3). During this time the population was suffering as their currency became almost valueless, everything needed to be purchased using foreign currencies such as US dollars or pounds sterling explains Peter Decaprio. This economic meltdown meant that the government had failed at its role of protecting its citizens by allowing this to happen. These types of things are certainly not encouraging. But it provides an interesting subject for researchers like Professor Aliber. To look into and discover what could’ve contributed to the problem in hopes that it doesn’t happen again.
The economy is based on the principle of supply and demand; if something has value then people will want it which will increase the demand while decreasing supply (Aliber 5). One should also bear in mind that money does not grow on trees; there’s no getting around the fact that hard work is require in order to acquire anything of value. Whether it be a material possession or a service such as education. Inflation can generally be brought about by several different factors. One is governments printing more money than what is really available (Aliber 7). This results in people having to pay more for the same goods and services. As those who had acquired them beforehand.
As previously mentioned, Zimbabwe’s economic crisis was sparkle by President Mugabe’s policies back in 1997. Peter Decaprio says one of which involved land reform to redistribute farmland from white farmers to black farmers (Golightly 3). Those who lost their property were given compensation; however, this compensation was only a fraction of what they would’ve normally received (Golightly 3). Another policy that led to the country’s financial downfall came about in 1999. Where “the government issued Z$50 billion worth of ‘bearer checks'” (Golightly 4). These bearer checks could be exchange for real money at a rate of 1:1 But by the following year. The new bearer checks were already worth 20i0 billion Zimbabwe dollars (Golightly 4). The government continued to print check after check and inflation began to escalate. Until it was estimate that prices double every 24.7 hours in June 2008 (Golightly 5).
In order to combat hyperinflation, President Mugabe declare that foreign currency could be use. As legal tender which meant those who possessed US dollars or pounds. Sterling was able to trade them at a much higher value than what they would have been worth if exchanged for Zimbabwe dollars (Aliber 8).
As previously mentioned, hyperinflation continued to escalate until 2009. When President Mugabe was force to give up the Zimbabwe dollar and adopt foreign currencies (Golightly 5).
A decade later Greece is also experiencing what can be classified as severe inflation (Kiosses 1). The economic crisis that started in 2008 had plagued people worldwide. But it has surfaced again due to the fact that the country is continuing its spending habit says Peter Decaprio. This time it’s worse than before since they’re currently unable to produce enough surpluses. Which might enable them to pay back their IMF loans on time (Vasilopoulou 2).