Economic collapse is the ultimate disaster from the point of view of an economy. It’s a stage where production is totally stagnated and depression is largely prevalent. Most often, economic collapse is also followed by civil unrest, large scale poverty, economic isolation etc. However, current economic scenario in world can be not be termed as economic collapse.
Indeed, either many countries are firmly in the grip of recession are on the verge of it but economic collapse is far from sight. When one talks about economic collapse, there are few particular examples of complete collapse.
The first was seen during the great depression era, economic collapse of erstwhile USSR, then 1997-98 south east nations crisis and Russian’s collapse of 1998. Argentina and Zimbabwe have also gone through complete economic chaos.
The current economic turmoil faced by developed nations had its seeds in financial irregularities and irrational exuberance of housing mortgage bubble. The money was freely given to people without substantiating their credit worthiness. This resulted in money being freely given to undeserving people who were not capable of returning it back. Big firms of Wall Street also invested large sums of money without really thinking about authentic return.
Short term stratospheric return was enough to further enhance the greed. And finally the bubble burst and with that many heads rolled and many companies bit the dust. Economists were already apprehensive about direction of global market and ever so increasing greed of corporate firms.
For over a decade world was witnessing a sustained period of growth. Asian countries in particular had become the new workforce of the world. Recession is a part of economic cycle.
In modern day world all the economies are inter-linked. So effects of crisis faced by USA and Europe can definitely be seen in Asian countries.
China and India are facing gradual slowdown, falling exports, rising unemployment and low industrial production. But things are not as bad as ‘economic collapse’. 2009 is going to be tough for most of the economies.
India is also going to face hardships but in the long run the growth story is intact and well on its course.