The current buzz word for developed countries and developing economies is the “Financial crisis”. The whole word speaks about current financial crisis and its outcomes. What is this financial crisis? Due to this financial crisis leading economies have collapsed and developing economies has started to rise in the world economic competition.
It was surprising that how some developing economies such as China and India rose during the financial crisis and many scholars still hold the question as to what were their secrets of managing their economy. And it is still unbelievable how did cooperate giants in developed countries such as USA collapsed over night due to the financial crisis and led to a depression in their trade cycle.
There are reasons behind every outcome of financial crisis. Both poor and exceptionally high performance can be justified by their economic plans and activities they undertook last few years. It is said that main reason for the fall in leading economies is poor financial planning. Too many big financial projects they undertook and unplanned huge monetory activities have led to the collapse and it has shown its impact on 3rd world countries who were surviving with the assistant of those so called developed countries.
Mean while there were many developing countries emerging and trying to help the world economy to recover throughout this research I am going to introduce factors which made them perform better during the financial crisis. And also this report contains description about the change in the world economic order after the financial crisis mainly due to the emerge of BRIC countries (Brazil, Russia, India and China)
Symptoms of Financial Crisis and Its Outcomes
It is said to be that there is a new economic order in the world after the fall of American and other leading economies, such as UK and Japan. The fall in the leading economies has resulted in failure of key businesses and declines in consumer wealth estimated in the trillions of U.S. dollars. Since developed economies underperform and developing economies try to shine over the falling developed economies the pathway for a new economic order was established in the world. The financial crisis has lead to poor people becoming poorer, collapse of leading economies such as USA and UK, increase in redundancy rates, unemployment, collapse of major corporate giants such as General motors and rise in food prices which in turn has lead to the problem of hunger becoming worse. As the share and house prices became very low, many corporate giants collapsed as there were no ways to fund their investments and day to day businesses were marking huge losses on their financial records. There was a huge political instability taking place during late 2007 and early 2008, as a result of the down turn in world economy where leading economies showed poor results when compared to the so called developing economies. This recession was said to be the worst economic crisis after the Second World War and continues to affect mainly the European and American economies.
Many countries faced the year 2008 and year 2009 with a slump in their economies. Mortgage disaster in the USA caused a great impact on all other international stock markets. Stock market reports show a great jump for many other economies that would otherwise have been ranked down. Peru, Brazil, China and a couple of weeks ago, Sri Lanka emerged the 4th best performed stock markets in the world. Reports say that China has an annual economic growth rate of 9% and most expert economists see Asia to have most of the strongest emerging markets. To many, this new trend in the international economies may seem like a refreshed economic order in the world.
“China and India together accounted for just 20% of the total increase in emerging markets’ GDP last year, with important contributions from the newly industrialized Asian economies (South Korea, Taiwan, Hong Kong and Singapore), Middle Eastern oil-exporters and Africa, which posted real GDP growth of 5%”. (Siddiqi) Extracted from a business publication blog, this article reports how “emerging markets” like the South Eastern economies are contributing to the world’s GDP. This shows that new countries have found their foothold and a global change in economic powers.
The new leading countries with “emerging markets” formed BRIC (Brazil, Russia, India & China) and came to agreements and conclusion of not wanting to rely on other states. They also emphasized that their superiors should be included in the international financial institutions. They also believe that there is a dire necessity for a balanced, “diversified international monetary system”.
In a nutshell, financial crisis has resulted in collapse of leading economies, collapse of corporate giants, an increase in unemployment, redundancies, share prices going down and huge political instability. These symptoms proves us that financial crisis has adversely affected leading and developing economies.