Lessons from the Past: What We Can Learn from These 5 Economic Crises
Philosopher George Santayana once claimed that, “Those who forget the past are condemned to repeat it.” With talks abounding of a global economic recovery, but equal voices proclaiming that caution should be the word of the day, there are many lessons to be learned about the current economic climate and some potential dangers to it from looking at past crises.
1970s Oil Crises
In the 1970s, the United States was hit with two oil crises. The first occurred after OPEC scaled back oil production and sharply increased their prices, and the second occurred after the Iranian Revolution. These supply shocks to the oil market, which, being so closely tied to energy, increased costs across the board for companies and individuals alike, causing economic upheaval throughout the industrialized world.
While it doesn’t take a degree in economics to realize that a constriction of supply sends prices higher, the concerns are more potent for some countries than for others. The United States greatly expanded domestic oil production in the wake of the crises. However, for a country such as China that is poor in domestic sources of energy, the problem is far more pressing. This helps to explain the motivation for China’s approval of Russia’s disdain for a potential invasion of Syria as even the tension in the middle east forces oil prices upwards.