Responding to the global economic crisis can lead to a more Essay

Responding to the global economic crisis can lead to a more sustainable economy - Essay Example Financial break down occurred in these countries towards the middle of 2007 and intensified in the next year. The crisis had changed the economic working in most of these nations and led to stagnation of their economic growth (Obstfeld, Cho, and Mason 2012, 1). Bankruptcy filing by some of the largest financial institutions in the world, such as the Lehman Brothers and the Northern Rock, caused a steep collapse in the financial structure in the country and has triggered a global panic. It has disrupted the international trade pattern. The countries that take part in international trade are interlinked to one another through trade relations. Therefore the impact of recession created in the advanced countries owing to their economic and financial failure, have also spread to the other developing nations. This has brought in a recessionary pressure in the whole world (Takagi 2009). Financial crisis and recession in 2007 The twenty first century has been notified as â€Å"the era of gre at modernization†. However, these courses of events have caused concern about the economic growth pattern in the countries around the world. Depression in the business cycle in these cases has extended for more than four quarters (which is considered the maximum period of time for which an economy might stay in recession) (Arcega 2013). The future of the global economy is under lots of debates and discussion and experts opine that imbalances in the international trade pattern and overheating of the global economic structure and pose considerable importance on the economic future of all the countries. Hence, it is implied that the governments in these countries are required to take policy initiatives in response to this financial downturn in order to bring back stability in their economies (Obstfeld, Cho and Mason 2012, 2). In this context it has to be mentioned that the economic crunch has cast influence on the issue of sustainable development. The years prior to the financial crisis had witnessed good growth rate in the United States in terms of GDP. The GDP is commonly used as a measure of economic growth. The ideal growth rate of GDP is that particular rate of growth of the total national output, which is sustainable (Amadeo 2013). Macroeconomic policies therefore bear close connotation to sustainability issues (Eichengreen 2010). The financial crisis of 2007 has been compared by several experts to a bug that has eroded the hard earned benefits of good economic growth achieved by these economies prior to 2007. However, the more important question facing researchers and policy makers is that whether these development goals have been consistent with the concept of sustainable development. Sustainability and sustainable development The Federal government of the United States has applied the neo classical economic theory for attaining deep understanding of the economic issues occurring in these countries and curving out solutions from the fundamentals of this theory. The neo classical economic theory involves the dual notion of allocation of resources in the free market from within the resource endowment of the economy and the price system followed in such a market economy (Endres 2002, 6). Concept of sustainability Sustainability refers to the constraints put on the inter-temporal distribution of available resources that are used by the mankind for fulfillment of their current desires and requirements (Howarth 2010, 448). There are various notions about the concept of sustainability and these concepts are subjected to the economical, geographical, political, social and cultural precincts of each particular nation. Therefore, there is no strict and bounded definition of sustainability.