ISSN 2330-717X

What We Can Learn From The Financial Crisis

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People who became unemployed as a result of the 2008/09 financial crisis had to deal with a number of difficulties afterwards. In a long-term international study, the team led by sociologist Professor Markus Gangl at Goethe University has examined the social consequences of the crisis and political crisis management. In the latest issue of Forschung Frankfurt (Goethe University Science Magazine), which has a special focus on the coronavirus pandemic, Gangl presents some of the study’s results – and draws conclusions for the consequences of the pandemic. Forschung Frankfurt appears today for the first time as a print version in English.

Risk of poverty or divorce, unemployment, lack of educational opportunities, loss of trust: Economic shocks have substantial consequences for society. How do political systems deal with them? And above all: Which measures prove to be successful?

In a research project financed by the European Research Council (ERC), the team led by Markus Gangl, sociology professor at Goethe University, has examined and identified the social consequences of the 2008/09 financial crisis in over 30 countries: They range from a heightened risk of poverty and poorer career development opportunities to risk of separation, thwarted family planning and fewer educational opportunities for the next generation to a loss of trust in democratic processes.

One result of the study: The more well-developed social security systems are, the lower the risk of suffering poverty as a result of unemployment. Countries with long periods of welfare state policies were best able to cushion the consequences of the financial crisis; the population was less protected in the economically liberal Anglo-Saxon but also in Southern European societies. In Southern Europe, the financial crisis led to a labour market crisis that lasted for years.

In the coronavirus pandemic, the economic slump has been at least twice as severe as after the 2008/2009 financial crisis, yet many countries have so far succeeded in largely decoupling the labour market from it. “The painful learning process from the financial crisis has evidently led to European countries deciding to take much more resolute action in the realm of economic policy during the pandemic than they did ten years ago. And above all: They have together embarked on a path of substantive European social policy,” explains Markus Gangl.

In mastering the pandemic, Gangl considers that a critical issue lies – also in comparison with his study – in the young generation’s situation. After all, his own as well as earlier studies have shown that economic crises lead to a “perceived notion of the reduction of mental spaces” among young people. “Focusing on and boosting young people’s prospects in life will perhaps be the most important socio-political challenge,” says Gangl.

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