Welcome to Eureka Street

back to site


Britain's riots and the new financial crisis

  • 11 August 2011

London is burning. The violence and looting have spread to other English cities. Thieves outnumber police. The situation appears to be beyond control and its growth contagious.

Throughout the rest of the world, stock markets are tumbling at a rate not seen since the 2008 global financial crisis.

Are these two phenomena related? If so, what might their relationship say about where we are and where we are headed?

The violence and looting tells us that people are angry, and that in apparently affluent societies, the benefits are not shared in a satisfactory way. Riots throughout history have been driven by grievances which come down to basics: food, security, confidence about survival.

What is happening in London has not been contained to that city. And, I suspect, it won't be restricted to the UK. Unemployment in the US and many European countries is high and refuses to come down. Behind the unemployment figures hide people who are underemployed and others who have just given up looking for work.

This formula suggests the precedent in Britain could be just the beginning for people seeking a way to vent their frustrations.

The collapsing stock markets and the downgrading of the credit rating of the US tell us that the problem is only going to get worse. Investment capital is disappearing from markets, hidden, if it exists, in the deep pockets of terrified individuals and companies. These investors have suddenly seen their net worth collapse again for the second time in four years.

And what will be the effect? No new jobs created; people being made redundant because their companies can't afford to pay them; the government of the wealthiest nation on earth (the US) now virtually insolvent, and unable to stimulate an economy on whose prosperity so many others depend.

The result: more frustration among alienated people who see no future for themselves in societies where the financial gap between people is growing larger each day; riots driven by resentful people trying to settle scores they've wanted settled for a long while; crackdowns by governments whose legitimacy and control are threatened; misery and misfortune for any swept up in this whirlwind.

Trouble is ahead. There's no end in sight just yet to the stock tumble. And the frenetic energy of angry and frustrated people in Europe and the US is far from spent.

Apparently untroubled by this US/European collapse, Asian economies appear to be chuffing along at a great rate: high