January - March 2016 •
The Lion King
• 13
BUSTS AND BOOMS
BY MAZZI ODU
tories held by the Spanish, bought
stocks and used their “lucrative on
paper” South Sea Company shares
as a means for securing loans. The
problem lay in the fact that the South
Sea Company’s assets were based
on conjecture of victory, and when
the crash happened, it swept away
businesses that had essentially bet on
a win.
However, all was not lost as within a
generation, Britain went on to have a
century and a half of unprecedent-
ed growth: The Industrial Revolution.
This period saw the mechanization of
manufacturing and agricultural pro-
cesses. One could argue that the
crash of 1720 forced people’s hands
to think beyond mere speculation and
create systems and solutions that built
long term wealth.
For a crash of biblical proportions, look
no further than the 29th October 1929
Wall Street Crash, coming hot on the
heels of a decade of unprecedented
growth in the USA and Europe. Some
argue that the Roaring 20’s were the
Boom of all Booms, with steel, automo-
bile, retail and construction industries
experiencing unprecedented growth.
A commodities crash precipitated
by a slump in grain prices added
to the nations’ woes. What followed
and gripped the now global interde-
pendent economies was The Great
Depression, which lasted until the out-
break of the Second World War in
1939.
For a perspective of the severity of this
crash, Global GDP dropped by 15%
(compared to the mere 1% of the 2008
crash) and unemployment reached
50%. However, even then, it was not
all bad news. Some global multi-billion
dollar institutions that are still going
strong have their roots in the Great
Depression: including Fisher-Price,
Universal Music Group and Morgan
Stanley.
History has proved that we cannot
eradicate economic down times as
they are part and parcel of the capi-
talist system. However, what we can
do is prepare: adapting to different
conditions and most of all champion-
ing innovation.
S
o how do you cope with strait-
ened economic times? Do you
shake your fist in anger at the past
or even current government or blame
it all on the collapse of oil prices? If you
are thinking ‘we never had it so bad’,
cheer up. Booms and their accompa-
nying busts have been happening for
centuries and the good news is, clever
ingenious resilient humans have been
coming up with ways and means to
work themselves out of them.
Here is a brief history of booms and
busts and how the busts were success-
fully overcome:
For the first global economic crisis, one
needs to look to the United Kingdom
(where else?), for the 1720 South Sea
Bubble. The crash was brought about
by the sudden collapse of share prices
of the South Sea Company founded
as a means for the United Kingdom to
continue to fund two ruinous wars it
was fighting in Europe.
Investors, speculating on British vic-
tories and the potential control of
the lucrative South American terri-
January - arch 2016
