It is hard to overstate the sheer economic cost of the 2008 financial crisis. The combination of increased expenditures and decreased revenues resulting from the crisis from 2008 to 2010 is likely to cost the United States government well over $2 trillion, more than twice the cost of the 17-year-long war in Afghanistan. Broader measures are even more damning. Measured by decrease in per capita United States GDP compared to the pre-crisis trend, by 2016 the crisis had cost the country 15% of GDP, or $4.6 trillion. Such numbers are too vast to be understood in any meaningful way, but one on a smaller scale may be even more powerful. A 2018 study by the Federal Reserve Board found that the crisis cost every single American approximately $70,000. Just in dollar terms, the crisis was arguably the most significant event of the 21st century so far, and the largest single economic downturn since the Great Depression. If the only effects of the financial crisis were economic, it would still be worth revisiting 10 years later.
The Social and Political Costs of the Financial Crisis, 10 Years Later
The economic costs of the financial crisis were staggering. But the most important effects of the financial crisis may be political and social, not economic. The years after the crisis saw sharp increases in political polarization and the rise of populist movements on both the left and right in Europe and the United States, from Brexit to Trumpism. At the core of the problem: The American financial system threatened to cripple the world economy. To avoid disaster, the U.S. government bailed it out. While this may have been the most efficient way to respond to the crisis and prevent it from becoming even worse, this response still strikes most people as fundamentally unfair. Justice is about much more than economic efficiency. It fundamentally also requires fairness.