What are the roots of this financial crisis?

As Europe lurches from one day of crisis to another, it is common to hear people ask “Where will it all end?” However, I think it is more important to ask “How did it all start?” With regard to the UK at least, I saw a television programme recently that included a large proportion of archive film/TV footage from the 1950’s, which indicated that with the end of rationing came also the beginning of HP. Unfortunately, this particularly HP was not a new spicy tomato sauce, it was hire purchase (otherwise known as easy “buy now pay later” credit). I often used to think that my parents’ generation grew-up believing that (with the possible exception of houses) you should save-up for something and then buy it. However, for most people my age, it would seem that this mentality was that of their grandparents: Easy credit has, apparently, been around for longer than you might think but, you may well say, so what? Well, I think we are so accustomed to it that we don’t question it but, I believe this all-pervasive assumption that we should all have everything we want as soon as we want it (and the general experience of having those wants instantly satisfied) is the root cause of the current global financial crisis (and, I would argue, the environmental one too; but let’s not digress just yet). It was this kind of thinking that prompted me, back in July, to post an item entitled, “Is global Capitalism heading for bankruptcy?” on my old Earthy Issues blog and; I must say, I am inclined to think it is because… “The illusion of [mankind’s] unlimited powers, nourished by astonishing scientific and technological achievements, has produced the concurrent illusion of having solved the problem of production… based on the failure to distinguish between income and capital where this distinction matters most… A businessman would not consider a firm to have solved its problems of production and to have achieved viability if he saw that it was rapidly consuming its capital…” E.F. Schumacher, in Small is Beautiful (1973) Therefore, to answer a question I posed in an earlier post, I think the campaign of denial began over 40 years ago; in the firestorm of abuse and ridicule to which Schumacher, and writers such as Paul Ehrlich, Garrett Hardin, Dennis Meadows, and William Ophuls were subjected. However their warning about Limits to Growth (i.e. a real appeal to reason) has never been falsified – it just has not been proven to be well-founded, until now. This was also predicted: “…the more successfully society puts off its limits through economic and technical adaptations, the more likely it is in the future to run into several of them at the same time… the [model] does not run out of land or food or resources or pollution absorption capacity, it runs out of the ‘ability to cope’ [i.e. too much industrial output has to be diverted to solving problems]…” (Meadows et al (2005), Limits to Growth: the 30 year update, p.223). The emphasis here is mine; but this is exactly what we have seen happen this year (from the Arab Spring onwards). Former World Bank economist, Herman E Daly, once put it very simply: “The Earth may be developing; but it is not growing!” Thus, whether it be on a personal, national, or global level, the urgent need is the same; we need to start living within our means.