The current stock market crisis followed the period of fastest growth in world markets in history. How can this be explained? And what does it indicate for the future? Jean-Pierre Petit addresses these questions here. He describes the crisis, which began in the United States and then spread to Europe, as minutely and as clearly as could be wished for. While the bullish market that preceded the crisis was hyper-inflationist, we are now experiencing a period of deflation, a drop following on the heels of a vertiginous rise. In this respect, Petit’s interpretation is that of the regulationists: the crisis is one of confidence. There is a lack of confidence both in the old-style economy (after Enron) and in the new economy, which has failed to provide the profits it had promised. But the crisis has revealed structural weaknesses in various countries. In Japan and Germany, economic inflexibility is coupled with an ageing population. In the United States, capitalism, accounting practices, and the financial rewards that are commonly granted to management solely take into account the stock market — leaving companies adrift without business policies or industrial strategies. Petit believes that, in the future, U.S. economic power will remain dominant, while Europe will continue to suffer from its internal divisions.

Jean-Pierre Petit is head of economic research for the investment company Exane.