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Protesters hold signs behind Richard Fuld, chairman and chief executive of Lehman Brothers Holdings. Image: REUTERS/Jonathan Ernst
Protesters hold signs behind Richard Fuld, chairman and chief executive of Lehman Brothers Holdings. Image: REUTERS/Jonathan Ernst

10 years after the crash – Analysis

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Protesters hold signs behind Richard Fuld, chairman and chief executive of Lehman Brothers Holdings. Image: REUTERS/Jonathan Ernst

Ten years after the global financial crisis that made thousands of Americans homeless and millions of Europeans jobless, experts fear that a new crisis – even tougher – is just around the corner. Are the regulating laws voted by western countries following the downfall efficiently preventing from another crisis to happen again? Have westerners changed their way of working and consuming since?

As digitalization has taken a new turn in the past decade, workers have found a new way of working, while startups and tech entrepreneurs are now leading the path to a new way of managing.

The environment has changed, too. While global change has become a major topic amongst humanity since 2008, is the economy helping the world to maintain a sustainable way of living? Has finance taken any steps to reduce its carbon footprint?

While the United States seem to have recovered, Germany seems to be stronger than ever thanks to a complete change of their financial structure. In France, the numbers released earlier this week are grim, while the United Kingdom has been spiralling down since the Brexit vote.

In the meantime, digitalization and sharing economy have succeeded in creating new sustainable economical models. Analysis.

The situation ten years after

On September 2008, “Investment banking giant Lehman Brothers filed for bankruptcy after the federal government signaled that there would be no bailout”, Fortune reported last year.

Lehman Brothers, one of the most famous American investment banks founded in 1850, collapsed overnight, after its investors realized its balance sheets were falsified by Lehman’s top executives for years.

As Lehman Brothers was deeply involved with subprimes, a then very popular housing loan product sold across the United States, Wall Street crashed dramatically – a first since the Great Depression. In Europe, markets fell dramatically too – and the world seemed to live the worst economical crisis it has known since the thirties.

Within a day, millions of Americans saw their retirement plan crashing by more than 30 percent. The job market got hit by the crisis too. In 2008, unemployment raised by 10 percent in the United States and about “six homes were foreclosed on every minute until early 2009”, reports the magazine.

In Europe, unemployment rate started rising as well – reaching 10 percent by 2010, while the proportion was very low before the crash, just above 7 percent.

A decade later, what does the situation look like? Experts are very skeptical and are very suspicious towards the current governments in place.

JP Morgan CEO Jamie Dimon doesn’t trust doing business with Washington because “the next government can do whatever they want.” Image: REUTERS/Dylan Martinez
JP Morgan CEO Jamie Dimon doesn’t trust doing business with Washington because “the next government can do whatever they want.” Image: REUTERS/Dylan Martinez

J.P. Morgan’s CEO, Jamie Dimon even confessed that “The next government feel like they can do whatever they want”, he said on CNBC yesterday, analyzing what has changed in the past ten years in the financial world. He explained that compared to the prior governments, there were lots of uncertainties regarding the leading powers among the western world, from the United Kingdom to the United States.

After he gave his interview, he received a lot of public support by other experts. His point of view was shared by many experts in the industry who believe that there is an unclear future on how finance would be able to handle another crisis.

As for Germany-based Martin Hellwig, former director of the Max Planck Institute for Research on Collective Goods in Bonn: “The banks’ level of debt was a serious factor in the crisis. In 2007 the large banks had lent between 96 to 98 percent of their total equity, and only retained between 2 and 4 percent. That rate today is around 93 to 96 percent, which is still irresponsibly high.”

According to a report by SAP, the entrepreneurial sector is also deeply affected. Companies today are 460 percent more likely to fail within five years. In order to proceed to a better limitation of the markets, countries have passed regulations. Although specialists are skeptical about their efficiency.

Have laws really changed?

Bank Funding. Source: Reuters Interactive Graphics
Bank Funding. Source: Reuters Interactive Graphics

In 2010, the United States voted the Consumer Protection Act in order to prevent another crisis. The Act requires more than 240 new federal rule-makings to implement its provisions.

Following this reform, regulators faced an thorough period of rule-making for at least 18 months. For the Michigan Institute of Technology, those regulations were a good thing: “A large portion of it is driven by being responsive to regulations”, researchers report.

However, as a Harvard published report noticed, “the legislation is complicated and contains substantial ambiguities, many of which will not be resolved until regulations are adopted, and even then, many questions are likely to persist.”  

In Europe, things look a little bit less dramatic. In a special tenth-anniversary feature, the BBC concludes that “The Bank of England insists that regulations covering the banks and the wider financial services sector are now far more robust.” And that “a similar crisis could not happen again”.

The crisis was so deep that the British government announced the end of austerity only this year.

On the Old Continent, France pushed tremendous efforts for more transparency, especially after an over-mediatized trial where French trader Jérôme Kerviel, who stole €4.9 billion to French Bank Société Générale during on of his last shifts of the year 2008. Cybersecurity law passed, in order to monitor better employees and restrict their decisions.

However, the crisis in financial the markets have had terrible effects on the society, even when the regulations were voted. Unemployment rate increased on an average of 10 percent within only a year between 2008 and 2009, some western countries reached record highs – such as Greece, with a 40 percent unemployment rate.

For some countries, the situation seems to have worsen in different fields – especially in France and in the United Kingdom.

In France, numbers are grim

It took France almost a decade to recover from the 2008 financial crisis, reported Libération with newly numbers published this week. According to the government statistics, about 8,8 million people in France are considered “poor”, meaning living under the poverty rate – about a dollar a day.

According to a recent study published by Ipsos, more than 20 percent of the French population cannot afford eating three meals per day. In addition to this, about 27 percent of the French population cannot afford buying fresh vegetable and fruits, and are thus putting their health at risk.

On the other hand, the French government recommends to eat five fruits and vegetables per day to maintain a good health – as said in the government subsidized commercial on TV.  

French children are in distress, too as some of them do not have access to regular meals. In some schools, breakfast is given to children for free, as most one child out of five is considered “poor”.

Yesterday, the French government announced that several cities and other local authorities will expand this breakfast program to pay for pupils’ breakfasts.

As per the job industry is concerned, news are bad too. This year, about 13 percent of French employees say they had difficulties making both ends meet at the end of the month.

Strikes have been going on for months in the country, while the French President Emmanuel Macron is pushing laws to reduce pension, push back retirement age – in other words, duplicate what Germany did before the crisis.

As unemployment costs several billion euros to the French government, the latter has launched a large campaign across the country for companies to hire unemployed individuals for a very cheap salary – they are called the “frank jobs”.

While the French government pays for the employee’s salary, this one is most of the time less than the legal minimum and spirals down thousands in scarcity.

As a matter of fact, for many economists, France might “hide” more individuals in scarcity, as migrants, long-term job seekers and other non-listed people who are not taken in account in the official metrics.

In France, households’ consumption have dropped this year from 0,1 percent to 0,2 percent. Official reports explain this fall by a rare transportation situation.

Indeed, the national strikes earlier this year organized by the national railways SNCF and Air France prevent people from going on holidays, and thus, consuming. These strikes were the longest that the country has known since 1995.

Last but not least, if French people consume less, it is also a cultural trait: French people are more cautious of what they consume and tend to consume less than their Anglo-saxon neighbors.  

U.K’s economy braces for Brexit

A total different scenario has happened across the Channel: as for the United Kingdom, the national economy is spiraling down since the Brexit vote.

After being the “hotspot” for traders and the finance industry, Canary Wharf and Saint Paul, the two central business district centres of the British capital lost a of lot of their reliance after the vote.

Many companies, in the wake of the crisis, announced that they would move their office to Germany, France, or any other country from the European Union in order to avoid possible additional taxes.

The current situation of a “hard” Brexit does not improve the current morose mood. On Tuesday, executives from Citi, Barclays Ireland, and JPMorgan said they would expect to transfer several hundred jobs out of Britain in the immediate aftermath of Brexit next year. It is less than the hundred expected, but still shows the worry of investors.

And the falldown of the British economy is spreading to the whole country. As the BBC reported yesterday, British workers’ average yearly salary is £800 lower than expected. The report sparked controversy among finance experts in the country.

Yesterday, Bank of England governor, Mark Carney, shared to the BBC that ”the UK hasn’t seen a period of such weak income growth since the 19th Century.” Budget allocated to Public services have shrunk as well such as the National Health Service – and universities have never been so high, causing major uproar in the population.

One of the many reasons for this grim situation is that basic income jobs in the retail industry dramatically dropped after the abrupt shutdown of more than 6,000 stores across the country only for the year of 2017. The most famous was BHS, a department store nearby Oxford Circus which shut down in 2015.

The new face of UK’s economy, offering lower-paying roles than high executive jobs has certainly played its part.

And while the country braces itself as Brexit will take effect in less than 200 days, uncertainty on the next upcoming months remain.

First off, daily products might be more expensive than ever before, especially yoghurts, butter, cheese, as “Britain does not provide enough milk to supply demand”, analyzes the Guardian. If Britain leaves the European Union under the World Trade Organization’s trading deal, things will seem pretty uncertain.

According to a former UBS employee who was interviewed by Reuters earlier this week, “All financial services firms face risks arising from the highly febrile national and international political environment – this includes not only Brexit, but the growing disputes in global trade and the unpredictable nature of various countries’ foreign policies.”

In addition to this, a new report published by PWC said noticed that the first quarter of 2018  was “the toughest first quarter since the last recession in 2009-10″, quoting the bankruptcies of Toys’R’Us, CarpetRight, Homebase and outlet Store Twenty One.

Also, some bigger chains such as Clarks, Marks & Spencer and Debenhams have closed “a handful of stores as shoppers”, reports the Guardian. Brits have been taking less holidays too, since their consuming power remains uncertain.

Most recently, Eurostar border control police said they would go on strike, as international checks at the borders from France the U.K will be reinforced in a few months.

Meanwhile at 10, Downing Street, the Prime Minister has been going through a lot of ups and downs. The very controversial Theresa May – quite often compared to Margaret Thatcher, has been very unpopular; and her way of mismanaging a “soft” Brexit could only make it worse on the international scene.

Indeed, the international relationships have dramatically changed within ten years. To begin with, global trade agreements are on their way to shift dramatically – from China tariffs to the new Tafta agreement, from Brexit being out of the World Trade Organization to the United States adding taxes on steel and other importations, the global trade market has been deeply shaken for the past few years.

As international organizations passed laws in several countries to regulate the financial markets, have those really changed the way they do business? It seems that while some countries have encountered difficulties to  recover from the crisis, Germany has managed to emerge from the crisis, thank to a more robust and better organized system.

How Germany emerged from the crisis

Germany is the country who was the hardest hit by the crisis; however, it was the one who emerged the fastest from it, with an admirable growth since, less than a year after the global crisis.

Within a few months, the country built strong technological capabilities, which resulted in higher productivity growth and non-price competitiveness.

Compared to the Eurozone, there was no wage squeeze in manufacturing – although the hourly rate is very low. On top of this, Germany’s wage limit in non-traded activities was less tight than overall Eurozone wage moderation.

So, what is the secret ingredient of Germany? Anticipation. The country started voting game-changing laws in 2000, a few years before the crisis happened. In order to reduce the costs of its public pension program, the country pushed back the age for retirement – something France only did after the crisis, after months of strike.

Germany also got rid of some social benefits, including extra-payment on Christmas Day and other holidays for various industries. While anticipating without before aware of it, Germany was best prepared for what the economical crisis.

As a report from the Delft University of Technology concluded, Germany is good example that ”The stronger is a country’s technological competitiveness and the more effective is its consensual macro-governance structure (based on coordinated burden sharing), the more likely this country will weather a crisis”.

As Germany was mocked by its neighbors for being too vigilant, some of its neighbors had to face a massive increase of unemployed population, rushing some countries to take drastic measures in order to contain joblessness.

How the job market evolved

Unemployment rate, 1998-2018. Source: Reuters Interactive Graphics
Unemployment rate, 1998-2018. Source: Reuters Interactive Graphics

It was one of favorite Steinbeck’s topics in the thirties – it happened again in 2008. Overnight, dozens of thousands of Americans were laid off and most of them lost their home.

Ten years after, the economy seems to have fully recovered on the job market. However, a few tricks have allowed the governments to conceal some of the numbers – by creating new was outcasting some numbers.

Take as an example the zero-hour contract. This very popular contractor status, a law passed in 1996 which became very popular in the aftermath of the crisis, enables employers to pay contractors only when required.

Technically, a worker with a zero-contract hour is not a full employee; but for the law in the United Kingdom, he is. In other words: all the people registered as a zero-contract hour are not considered unemployed by the national statistics.

People working under this status receive no benefits, no paid holidays, no insurance, and are required to be available whenever the employer needs them. In other words, they received very little – or almost no – notice before their shift.

In 2017, more than 110 000 British citizens were working under those contract, sparking controversy as for workers rights. On average, a zero-hour contract worker makes $250 – way less than the legal minimum for a full time job in the United Kingdom.

Lately, this zero-hour contract seems to have seduced other European countries. While in France, the law requires workers to work on a legal hourly minimum, Germany has seen an economical growth right after the crisis thanks to those contracts – creating more opportunities and thus increasing the average yearly salary from €34 000 to more than €38 000.

Beyond this increasing flexibility, the number of companies and self-employed individuals has never been so high in Europe.  As the European Foundation for the Improvement of Living and Working Conditions reports, out of 220,7 million workers in the European Union, about 17% of 14% self-employed individuals are considered “vulnerable”, making less than the average salary, reports the Foundation.

As the consuming power fluctuated in different areas, so did the habits of consumers, too. While in the Western countries capitalism has scared off most consumers and shown its limits, new alternatives are rising, while consumers personalities seem to be broader than ever.

This past decade was also the birth of a unprecedented  digital revolution. It radically changed the way we communicate, work and consume and has been a game-changer in everyday’s life, especially since the launch of Apple’s IPhone and applications in late 2007.

The rise of GAFAS


With rents increasing and stores closing, Google, Facebook, Amazon and other Internet giants started from scratch and became the one-stop-shop rendez-vous for many consumers, looking for information advice, consumers reviews and eventually products.

With lower prices than physical stores and broad choice, a high majority of consumers have changed their habits and migrated online to buy the most common goods – even food. The most relevant example happened a few months ago, when Amazon bought Whole Foods.

As a result, the number of closing stores in the western countries has never been this high since the Great Depression. Google and Facebook are now the biggest advertising providers online, generating billions of dollars – and leaving very little for independent businesses. In 2018, GAFAs are said to generate two thirds of the ads online. And with 78 percent of the global mobile traffic being on smartphone by 2021, apps are only playing a bigger provider in jobs, too.

As a matter of fact, GAFAs have also become a huge provide of jobs, from tech engineers to logistical job at Amazon warehouses. Nowadays, about 25 percent of all of open jobs in the European Union are related to technology, thus boosting some remote parts of France like Creuse or parts of northern England where the employment rate was very low a few years before. GAFAs have been welcomed in former industrial regions, where jobs are rare.

Just like in Europe, those jobs were created in low-income parts of the country in the United States, especially in the Rust Belt. This enabled former working class Americans to climb the social ladder and being able to belong to the middle class. Real estate investments are taking the bait. For example, housing in Pittsburgh, Pennsylvania, which was at its lowest in 2017, has risen by 162 percent within a year.

In the United States, about a million jobs were created in the past seven years in the western world, bringing the total of jobs created in the tech industry to more than 4,2 million jobs in the U.S today. Those numbers are said to grow four times bigger by 2026.

And by giving more jobs to the people and thus more consuming power, Internet giants have changed the working landscape and the usual corporate – and sometimes old-fashioned – rules.

Instead of a classic nine-to-five office job, high tech employers offer flexibility during working hours, as much as new working spaces. It seems that the millennial generation has invented a new way of working, creating a more and more blurry line between working and personal life – here are a few examples.

A new way of working

Have you ever heard of “paternalism”? This concept from the Soviet era might probably scare you off – but when compared to today’s digital economy, you might see the resemblance.

Paternalism was all about revolving around a company: workers would have their house next to the factory, they would buy their grocery at a supermarket owned by a company. They would buy the same car, whose loan would be approved by the employer, children would go to the same school, etc…

In the rise of co-working space, some similarities remain: We Work is a good example of the fractioned post-crisis global economy.

Launched in New York only two years after the crisis, it has become the biggest shared office space service in the world and one of the staples of the startup generation.

Today, We Work counts 270 locations in 90 countries in the world where freelancers, startups, small and middle-sized companies share a building and can choose from a various option of spaces, from a desk to an office room, to a whole private floor office. As of July 2017, WeWork had a valuation of US $20 billion.

It also shows another post-crisis crucial element: co-working is one of the best investments in commercial real estate after the subprime crisis. Forecast shows that half of the American workforce is expected to be freelance in 2020.

Other GAFAs were inspired by this concept, just like Google who replicated co-working space with “Campus”. Services include: a campus-like atmosphere with a coffee shop at the entrance. This gamification of work, designed by the new tech industry is taken to the next level, from beer-pong parties to conferences, but also rounds of seed and event rentals.

This new way of working in the digital world has also consequences on the work benefits. As the job is gamified, so are the benefits. Instead of pension and healthcare benefits, companies include in the hiring package lighter deals – but more attractive ones for the new generation – such as getaway weekends and free alcohol.

Indeed, employers provide more perks to increase team spirit – and thus increase production. More than 60 percent of active workers in France are using their smartphones and computers on holidays, although not required (but pressured to do so).

However, a recent study has shown that more than 40 percent of tech employees suffer from acute stress or anxiety – and while the “Happiness Office Manager” has become a managerial role in most of the tech companies, some employees prefer to get involved in another new economy: the degrowth, attracting more and more millennial.

Degrowth: the rise of sharing economy


Western consumers and startuppers tried to find a new way to consume: greenwashing was born in 2010, after lost consumers lost their usual landmarks. In 2010, more than 57% of consumers said they considered more buying a product if the latter was labelled green.

In order to contain a new crisis, words like “organic”, “ethical”, “sustainable” or “responsible” invaded the global marketing strategy. The goal is to bring a conscience to consumers, who lost their faith after the crisis.

Recently, banks seem to have made a step towards responsible banking, too. Motiv, a free mobile bank account, helps users improve their credit score without going into debt. According to the Federal Deposit Insurance Corporation, nearly 70 million Americans are still considered underbanked, making it difficult to build a traditional credit score and access affordable financial services.

With the rise of the sharing economy, it seems that the western world has learnt its lesson: sharing is caring for others, and consuming responsibly might be an environmental and financial sustainable solution.

As this new responsible economy generates a positive impact for the energy and the consumer goods industries, it seems that sharing goods might be the most sustainable solution for the next decade – and the best shield against another financial crisis. 

Note: The opinions expressed in this article are the author's own and do not necessarily reflect the view of Alvexo on the matter.