In this essay I will give you a brief background to the financial crisis and summarise its main consequences. Secondly, I will concentrate on how the economic downturn affected markets and institutions. Finally, I will focus on the effects on individual c
What is the economic basis of consumer culture? Alina Uberman
As the first decade of the 21st century comes to an end, it will stay in the world’s history described as a time of global financial crisis, with victims for many years to come.
In this essay I will give you a brief background to the financial crisis and summarise its main consequences. Secondly, I will concentrate on how the economic downturn affected markets and institutions. Finally, I will focus on the effects on individual consumer behaviour. Specific examples will include the property market, the car industry, employability, retail markets and businesses.
The credit crunch is considered as the deepest recession since the 1930’s. So what actually caused this dramatic downturn in the global market? Various factors had an important influence on this situation. The major damage was caused by banks which were lending money to people on low household incomes, (sub-prime market); poor credit history or to first- time property buyers. As a result, the borrowing records in the USA and UK created enormous debts. People were getting more money than they actually needed, even more than they could have afforded. Interest rates began to rise, house prices dropped rapidly, and borrowers were no longer able to repay their mortgages. Not long after, people started facing the consequences such as; bankruptcy, unemployment, rising consumer prices, housing market crash and record debts. The following examples will examine the effects of the crisis on businesses and marketing.
It has certainly been a difficult year for the car industry. Even the largest, exclusive-brand companies such as Jaguar-Land Rover (JLR) have suffered as a result of the global downturn. Today’s price-conscious customers are less likely to invest in large and particularly expensive vehicles. As a result, the company owned by Indian ‘’Tata Motors’’, decided to close down its site in the West Midlands. The company is concentrating on raising funds and taking out new loans. David Smith, chief executive of Jaguar-Land Rover said, that ‘’the brand have cut production, by more than 100,000 units, slashed spending, cut their headcount by 2,500, frozen pay and suspended bonuses since the beginning of the crisis, which has hit JLR’s.’’ (FT, 25.09.09, p.3: Jaguar to wind down plant). At the same time, Toyota, the world’s largest car manufacturer “has suffered a $4,9bn loss last year as car sales slumped due to the global crisis.” (FT, 3.10.09, P.18: Toyota grasping for salvation in crisis, says president). Only a year ago, Toyota celebrated record earnings when it overtook General Motors to become the world’s largest car maker. Unfortunately, according to its last forecast in August, the manufacturer expects to lose around ¥450bn this year.
