End of 2008: The world enters the decanting phase of the global systemic crisis - Anticipations over 2008-2013 for six groups of countries experiencing very different evolutions

If you were a subscriber to the GEAB, you would have read what follows as early as October 16, 2008.

The global financial crisis, which went through a major tipping point in September 2008 as anticipated by LEAP/E2020 last February (1), is only the detonator of the global systemic crisis. The financial and monetary chaos of the past months were only the triggers of a series of economic, social and political crises that will from now on give the pace to the last phase of this global systemic crisis. The most severe consequences - in human, social, economic and political terms - are still ahead of us, not behind. In this October edition of the GEAB (N°28), we therefore chose to establish the anticipatory schedule of the so-called « decanting phase », i.e. a phase along which the outcome of the crisis begins reshaping the global system (2). Our studies thus enabled us to make anticipations for the 2008-2013 period and for 6 groups of countries differently impacted by the 4 specific sequences of this phase: financial crisis, economic crisis, social crisis and political crisis.

Indeed, if the first three phases of the crisis were common to the whole planet because they affected the same global system inherited from 1945 and 1989, the fourth phase takes place very differently according to the country and to the specific impact of the crisis for each country. The shock was common, but the trajectories will be different from now on. In fact they constitute the process of reorganisation of the global system and prefigure the new equilibriums that will appear in the coming decade.

According to our researchers, the scale of the impact phase of the crisis' outcome on the various countries of the planet commensurates with their degree of resistance to the explosion of the « financial detonator » that went off one year ago. The more a country is « immune » to this financial shock, the better it will cross over the crisis. LEAP/E2020 has therefore studied the situation for the main countries and regions of the world along 7 precise criteria enabling to measure their degree of « immunity » to the « financial detonator ».

. Share of the economy dedicated to the financial sector
. Share of the economy dedicated to services
. Level of household debt
. Quality of financial system and household assets
. Relative amount of public debt (municipalities and social systems included)
. Relative amount of external debt (trade and payment)
. Share of capital-based pensions on overall pension fund system.

Based on these criteria, our team was able to identify 6 major groups of countries hardly related geographically but with similar profiles.

To make the results of their study easier to read, LEAP/E2020 has decided to present them in a visual way by means of:
. a geographical map of the world highlighting these groups in six different colors
. a temporal chart of the 2008-2013 period, showing our anticipations of the duration for each of the 4 specific sequences of that decantation phase: financial crisis, economic crisis, social crisis and political crisis.
Some more detailed explanations follow each graphic.

Area 1 gathers countries where none of the 7 criteria altogether is immune to the financial crisis, i.e. the United States, the United Kingdom and Iceland.

Area 2 gathers countries where 5 to 6 out of the 7 criteria are very sensitive to the « financial detonator », i.e. North American (Canada and Mexico) or European countries (Switzerland, Baltic states, Spain).

Area 3 gathers countries where 4 out of the 7 criteria are very sensitive to the financial crisis, i.e. Asia, the Netherlands, Belgium, and Scandinavia.


Area 4 gathers countries where 3 out of the 7 criteria are sensitive to the financial shock, i.e. the Euro zone, new EU-member states and the largest economies of Latin America.

Area 5 is special because it gathers countries characterized by an 8th criterion which appeared consistent and relevant to add to the study, and that is the degree of political, military and financial dependence on countries belonging to Area 1. These countries will be directly affected by the severe consequences of the crisis on Area 1, namely in terms of political stability. For instance: significant reduction of military support, suppression of food aid,... This group includes oil-producing countries of the Persian Gulf, as well as Taiwan or Colombia.

Area 6 gathers countries where the financial crisis barely has any impact or a very indirect one because their economy is hardly developed, i.e. most developing countries.

As regard to the temporal sequence of events along the phase of decantation, LEAP/E2020 tried to quantify the duration of each of the 4 sequences, i.e. of the financial, economic, social and political crises. Hereafter is presented the result of our anticipation for each of the 6 areas previously described.

The estimation of the duration of each of the 4 sequences was based on the three precise criteria:

1. Scope of the outcome of the crisis, as anticipated by LEAP/E2020, for the areas concerned. The more an area gathers countries where the consequences will be heavy, the longer the crisis will take.

2. Presence or not of a major social crisis and of a major political crisis. These two types of consequences will considerably lengthen the crisis because they will slow down all decision-making processes and aggravate the country's difficulties, and also because they imply that the country concerned finds a new political and social equilibrium (which can take time and be painful).

3. Degree of preparedness of the country's ruling elites (and to a lesser extent of the general public) to cope with the profound required reappraisal of the current system. The less they are prepared, the longer the identification of effective solutions will take.

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Notes:

(1) Source: GEAB N°22, 02/15/2008

(2) Early 2006, in GEAB N°5, the LEAP/E2020 team indicated that the global systemic crisis would unfold along 4 different phases: « A global systemic crisis develops following a complex process where 4 phases can be distinguished, overlapping one another: . in the first so-called “trigger” phase, a variety of until then un-related factors, start converging and interacting in a way that is perceptible mostly by careful observers and central players; . in the second “acceleration” phase, a large majority of players and observers suddenly become aware that a crisis is there and that it has already begun to affect a growing amount of the system’s components; . in the third so-called “impact” phase, the system starts to transform radically (implosion and/or explosion) under the strain of cumulated factors, simultaneously affecting the whole system; . in the fourth and last “decanting” phase, the features of the new system born from the crisis begin to appear.», Source GEAB N°5, 05/16/2006.