From Crisis to Recovery by Brian Keeley and Patrick Love ; Published by OECD and Academic Foundation; Pages 144 ; Price Rs 495/-

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                                  We had reviewed in these columns four publications of OECD brought out by Academic Foundation and noted that they were authoritative analysis of contemporary economic and social problems. The book under review is a part of that series and is an analysis of the current global economic crisis which was triggered by a financial crisis, in turn caused by the rising thirst for short term profits. The OECD’s response calls for strengthening corporate governance and combating the dark side of globalization, such as corruption and tax evasion. The Organisation’s extensive expertise in the analysis of economic growth, employment policy and financial markets has been utilized to great effect.

                                  The financial crisis of 2008 was the cause for the most serious economic slowdown since World War I I. The failure  of Lehman Brothers in September 2008 heralded the unprecedented collapse of  world trade and widespread job losses. It was called “The Great Recession”.

                                   This book traces the causes and courses of the crisis, analyses the post-crisis challenges, including employment, pensions and financial regulations. The suddenness of the financial crisis took many unawares. Financial pressures built up for years as funds flowed from emerging economies like China to developed countries like  U.S.A. Banks too were observed to be recklessly taking risks. Governments took extraordinary measures to keep financial institutions afloat and stimulate demand. These took the shape of support for banks and financial markets and effective  monetary and fiscal policies.

                                            When the crisis struck, employment in OECD countries was at it’s highest since 1980. By mid-2009 unemployment in OECD area stood at 8.3 %--an extra 15 million people out of work compared with 2007. By end 2009 the rate was 8.8 %. The downturn hit U S A—the number of unemployed persons grew by 7.9 million and unemployment rate doubled

from 5 % to 10.1 % in October 2009.

                                                Pension Fund Assets dropped by over

  $ 5 trillion from $ 27 trillion during the crisis. Most of the Pension Funds survived the crisis. The OECD has called for effective monitoring of investment risks and performance and of the relationship between Pension Funds’ assets and liabilities.

                                               What was the experience of the ‘Emerging economies’? . Early in 2009, Chinese officials reported that 20 million migrant workers had lost their jobs as demand for goods from customers in U S and Europe collapsed. But a year later the same officials reported growth at above 8%--a performance that left China “in extraordinarily better shape than many forecasters had expected”. Brazil and India weathered the storm relatively well-so well, in fact, that they have helped drive recovery in the global economy.

                                                 The crisis and recession revealed gaping holes in the role of the global economy. Financial markets are the most obvious targets for new regulations. But other areas too have come under increasing attention, including tax and the basic values of capitalism. Three main areas tackled are Regulation of financial markets  ;Tax evasion and Global standard for ethical behaviour. Strongly commended is the need for promoting a better balance between market forces and the societies they serve ensuring “stable, socially balanced and sustainable development of the global economy”. These have found a place in G 20 adopting “Core Value for sustainable economic activity.”

                                                   Assessing the future OECD  asserts that regardless of the pace of recovery, the recession will have long-term economic and social consequences. “ The crisis we have lived through is a “Black Swan” event—we did not see it coming ; it will continue to shape our economies for years to come and at some level,  we may be in danger now of beginning to rationalize it retrospectively ” . The next few years will bring challenges and opportunities. Societies will have to rethink about our priorities, about achieving higher economic growth and how to tackle global problems in a “shared  manner”.

                                                    A truly valuable analysis.

P.P.Ramachandran,

20-05-2012