Admit it's a 'Western financial crisis'

PUBLISHED : Thursday, 31 January, 2013, 12:00am
UPDATED : Thursday, 31 January, 2013, 5:37am

Why do we continue to call the recent turmoil the global financial crisis and not, as it should have been from the start, the Western financial crisis? After all, we have taken to naming financial crises by their origin in recent decades. It really should have been the "US and the euro zone financial crises".

So why this exception?

I was led to this question after reading the column of a highly respected British economics commentator - for whom I have the highest regard - in which he named the following: the Asian financial crisis of 1997 and 1998, the Russian financial crisis of 1998, the Brazilian currency crisis of 1998-99 and the Argentine crisis that ended in the latter's default in 2001.

To his list we can add: the Mexican peso crisis of 1994 and 1995 or the Tequila crisis, as Wall Street humour had it; and the Latin American debt crisis of the 1980s, which affected at least 16 countries in the region.

Yet when he described the most recent crisis, it was the "global financial crisis". Is there any doubt that The Trouble really started in the United States around the summer of 2007 when its housing market bubble began to burst? Sure, its effects eventually percolated through the global economy, and it was followed by the euro zone crisis. However, the major emerging economies recovered quickly and came out relatively unscathed.

The answer is, of course, Western arrogance - particularly American arrogance.

In a moment of frustration during the height of the euro zone crisis last year, European Commission president Jose Manuel Barroso stated that the continuing global crisis was triggered in the US. It was no more than a statement of fact, but it was enough to provoke a backlash from US broadcasters such as the Fox news channel.

To their credit, most fair-minded US commentators have acknowledged this basic fact, but persist in using that exceptional nomenclature. It must be due to hurt pride. For decades, everyone assumed Western policymakers and central bankers knew all about economics and finance, so such crises happened only to little brown people. But hubris is that moment before you fall flat on your face. And that is just too painful to acknowledge, even if it is impossible to deny.