Asad Mazhar

INSITITUTE OF BUSINESS AND

TECHNOLOGY
BIZTEK

INSITITUTE OF BUSINESS & TECHNOLOGY (BIZTEK)

 Asad Mazhar

CONTENTS
1. Economic Crisis.
2. Types Of Crisis.
3. 9-11 Crisis.
4. Effects Of US Economy.
5. Food Crisis.
6. Poverty Crisis.
7. Energy Crisis.
8. Trade Crisis.
9. Condition Of World Economy.
10. Economic Crisis In Asia.
11. Economic Crisis In Europe.
12. Economic Crisis In Africa.
13. Economic Crisis In Australia.

ECONOMIC CRISIS:
A situation in which the economy of a country experiences a sudden
downturn brought on by a financial crisis. An economy facing an

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economic crisis will most likely experience a falling GDP, a drying up of

liquidity and rising/falling prices due to inflation/deflation.

TYPES OF CRISIS:
 Financial Crisis

 Poverty Crisis

 Food Crisis

 Energy Crisis

 Trade Crisis

9-11-2001 US Economy Effect:

 Terrorist Attacks on American
 Highlights the US Economy

Early on the morning on September 11, 2001,

nineteen hijackers took control of four
commercial airliners en route to San Francisco
and Los Angeles from Boston, Newark, and
Washington, D.C.
(Washington Dulles International Airport). At 8:46

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am American Airlines Flight 11 was crashed into

the World Trade Center's North Tower, followed
by United Airlines Flight 175 which hit the South
Tower at 9:03 a.m. Another group of hijackers
flew American Airlines Flight 77 into the Pentagon
at 9:37 am A fourth flight, United Airlines Flight 93
crashed near Shanksville, Pennsylvania at 10:03 am, after the
passengers on board engaged in a fight with the hijackers. Its ultimate
target was thought to be either the United States Capitol or White
House.

Tuesday, September 11, 2001

8: 46 am – 10:28 am
Attack type Aircraft hijacking, Mass murder, Suicide attack
Death(s) 2,995 (including 19 hijackers
Injured 6,000+

The attacks had a significant economic impact on the United States

and world markets. The New York Stock Exchange (NYSE), the
American Stock Exchange (AMEX), and NASDAQ did not open on
September 11 and remained closed until September 17. When the
stock markets reopened, the Dow Jones Industrial Average (DJIA) stock
market index fell 684 points, or 7.1%, to 8921, a record-setting one-
day point decline.
By the end of the week, the DJIA had fallen 1,369.7 points (14.3%), its
then-largest one-week point drop in history, though later surpassed in
2008 during the global financial crisis. U.S. stocks lost $1.4 trillion in
value for the week.
This is equivalent to $1.69 trillion in present
day terms. Economist and Crisis Consultant
Randall Bell were retained by the city and state
of New York to compute the economic damages
to The World Trade Center site. He writes in his
book, Strategy 360, "The World Trade Center
damages, estimated by the New York City Mayor's
Office, were staggering: Clean up and stabilization
of the WTC site - $9.0 billion; Repairing and
replacing damaged infrastructure - $9.0 billion;
Rebuilding the World Trade Center as smaller
buildings - $6.7 billion; Repairing and restoring
other damaged buildings - $5.3 billion; Lost rent
of the destroyed buildings - $1.75 billion."

In New York City, about 430,000 job-months and

$2.8 billion in wages were lost in the three months following the 9/11
attacks. The economic effects were mainly focused on the city's export

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economy sectors. The city's GDP was estimated to have declined by

$27.3 billion for the last three months of 2001 and all of 2002. The
Federal government provided $11.2 billion in immediate assistance to
the Government of New York City in September 2001, and $10.5 billion
in early 2002 for economic development and infrastructure needs.
The 9/11 attacks also hurt small businesses in Lower Manhattan near
the World Trade Center, destroying or displacing about 18,000 of them.
Assistance was provided by Small Business Administration loans and
federal government Community Development Block Grants and
Economic Injury Disaster Loans. Some 31.9 million square feet of
Lower Manhattan office space was damaged or destroyed.

Many wondered whether these jobs would return, and the damaged
tax base recovers. Studies of the economic effects of 9/11 show that
the Manhattan office real-estate market and office employment were
less affected than initially expected because of the financial services
industry's need for face-to-face interaction.
North American air space was closed for several days after the attacks
and air travel decreased upon its reopening, leading to nearly a 20%
cutback in air travel capacity, and exacerbating financial problems in
the struggling U.S. airline industry.

The Impact of 9/11 on US Economic

Growth:
While, overall, the 9/11 attacks had a minute impact on the US
economy, New York’s economy endured a direct impact, both to its
private and public sector areas. “The destruction of physical assets
was estimated in the national accounts to amount to $14 billion for
private businesses, $1.5 billion for State and local government
enterprises and $0.7 billion for Federal government. Rescue, cleanup
Nevertheless, while a drastic departure from US markets did not occur,
there was a decline in cumulative FDI stock in the United States, falling
from a record 31.5 percent growth in investments in 2000 to a 6.9
percent growth by the end of 2001. Also, by 2002, investments fell
even further to -01.25 percent. Even still, these declines were
miniscule given the catastrophic events that occurred. Subsequently,
however, by 2003 foreign investments were back on the rise with
investors adopting more of a “wait and see how the US responds”
attitude than that of lack of confidence in US markets.

In the wake of the 9/11 attacks it was no surprise that U.S. military
action would be launched in Afghanistan in pursuit of Bin Laden and his
Al Qaeda network, which was being harbored by that country’s Taliban

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regime. US military action in Afghanistan was launched October 7,

2001. However, the US now finds itself simultaneously fighting two
wars, taking the “War on Terror” initiative into Iraq on March 20, 2003.
Both wars are
Ongoing as of this writing, and are funded through government
borrowing and not through a rise in taxes.34 Indeed, when military
action occurs, an increase in expenditures occurs as well, resulting in
both short and long-term impacts on the economy.35 Clearly,
engaging in two wars
Simultaneously has resulted in further budgetary expenditures. Table
VI depicts US military expenditures from 1988 through 2006.36 Notice
expenditures reached double digit percentage increases following the
2001 attacks. However, during the 1991 Gulf War, the US was still
actively engaged in the arms reduction process arms reduction Yet,
expenditures climbed due to the fighting of two wars as part of the
government’s War on Terror policy, going from $301,697 billion in
2000 to $546,018 billion in 2006.

U.S Military Expenditures (In Million Of Dollars)

Military Percent
Year
Expenditure Change
2.4%
1999 280,969

7.3%
2000 301,697

3.7%
2001 312,743

1999 2000 2001 14.0%

2002 2003
2002 356,720

16.4%
2003 415,223
The impact on foreign direct investment
FDI In the 464,676
United States. 11.9%
2004
1,256,867 1,343,987
Foreign Direct Investment 1,327,170
in the United States,1,395,159
955,726
1999-2003(In Millions of Dollars)

Change
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% 22.78% 31.50% 6.90% -1.25% 5.10%
 Asad Mazhar

FOOD CRISIS:
The years 2007–2008 saw dramatic increases in world food prices,
creating a global crisis and causing political and economical instability
and social unrest in both poor and developed nations.
Systemic causes for the worldwide increases in food prices continue to
be the subject of debate. Initial causes of the late 2006 price spikes
included droughts in grain-producing nations and rising oil prices. Oil
price increases also caused general escalations the costs of fertilizers,
food transportation, and industrial agriculture. Root causes may be the
increasing use of biofuels in developed countries (see also food vs
fuel), and an increasing demand for a more varied diet across the

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expanding middle-class populations of Asia. These factors, coupled

with falling world-food stockpiles all contributed to the worldwide rise
in food prices. Causes not commonly attributed by mainstream views
include structural changes in trade and agricultural production,
agricultural price supports and subsidies in developed nations,
diversions of food commodities to high input foods and fuel,
commodity market speculation, and climate change.

Due to food crisis death rate in China (1928–29) 5 to 10 million dead;

(1958–62) up to 20 million, Russia (1921–22) 1.25 to 5 million; (1932–
34) 6 to 8 million, India (1943–44) 1.5 million, Cambodia (1975–79) 1
million.
1. World population growth
Growth in food production has been greater than population growth.
Food per person increased during the 1961–2005 period.

Although some commentators have argued that this food crisis stems
from unprecedented global population growth, others point out that
world population growth rates have dropped dramatically since the
1980s, and grain availability has continued to outpace population.

However, despite production gains made in the last decade, world food
demand outpaces any production increases. According to Joachim von
Braun, of the IFPRI, total food production increases only about 1 to 2
percent per year, while total world population increases approximately
4%. Aggregate cereal grain food production, per capita, had risen
yearly from the 1960s to the 1980s but has been in decline since.
However, this does not take into account any non-food uses of grain
production.

World population has grown from 1.6 billion in 1900 to an estimated

6.8 billion.

Increased demand for more resource

intensive food
The head of the International Food Policy Research Institute, stated in
2008 that the gradual change in diet among newly prosperous
populations is the most important factor underpinning the rise in global
food prices. Where food utilization has increased, it has largely been in
processed ("value added") foods, sold in developing and developed
nations. Total grain utilization growth since 2006 (up three percent,
over the 2000–2006 per annum average of two percent) has been

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greatest in non-food usage, especially in feed and biofuels. One

kilogram of beef requires seven kilograms of feed grain.These reports,
therefore, conclude that usage in industrial, feed, and input intensive
foods, not population growth among poor consumers of simple grains,
has contributed to the price increases.

2005/1990 ratios of per capita consumption

India China Brazil Nigeria

Cereals 1.0 0.8 1.2 1.0

Meat 1.2 2.4 1.7 1.0

Milk 1.2 3.0 1.2 1.3

Fish 1.2 2.3 0.9 0.8

Fruits 1.3 3.5 0.8 1.1

Vegetables 1.3 2.9 1.3 1.3

Although
the vast
majority of the population in Asia remains rural and poor, the growth of
the middle class in the region has been dramatic. For comparison, in
1990, the middle class grew by 9.7 percent in India and 8.6 percent in
China, but by 2007 the growth rate was nearly 30 percent and 70
percent respectively. The corresponding increase in Asian affluence
also brought with it a change in lifestyle and eating habits, particularly
a demand for greater variety, leading to increased competition with
western nations for already strained agricultural resources. This
demand exacerbates dramatic increases in commodity prices such as
oil.

Another issue was rising affluence in India and China was reducing the
'shock absorber' of poor people who are forced to reduce their
resource consumption when food prices rise. This reduced price
elasticity and caused a sharp rise in food prices during some
shortages. In the media, China is often mentioned as one of the main
reasons for the increase in world food prices. However, China has to a
large extent been able to meet its own demand for food, and even
exports its surpluses in the world market.

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Impact of petroleum price increases

The rise in the price of oil has heightened the costs of fertilizers (in
some instances doubling the price within the six months before April,
2008), the majority of which require petroleum or natural gas to
manufacture. Although the main fossil fuel input for fertilizer comes
from natural gas to generate hydrogen for the Haber–Bosch process
(see: Ammonia production), natural gas has its own supply problems
similar to those for oil. Because natural gas can substitute for
petroleum in some uses (for example, natural gas liquids and
electricity generation), increasing prices for petroleum lead to
increasing prices for natural gas, and thus for fertilizer.
Costs for fertilizer raw materials other than oil, such as potash, have
themselves been increasingas increased production of staples
increases demand. This is causing a boom (with associated volatility) in
agriculture stocks.
Idled farmland
According to the New York Times on April 9, 2008, the United States
government pays farmers to idle their cropland under a conservation
program. This policy reached a peak of 36,800,000 acres
(149,000 km2) idled in 2007, that is 8% of cropland in United States,
representing a total area bigger than the state of New York.

Agricultural subsidies
The global food crisis has renewed calls for removal of distorting
agricultural subsidies in developed countries. Support to farmers in
OECD countries totals 280 billion USD annually, which compares to
official development assistance of just 80 billion USD in 2004, and farm
support distorts food prices leading to higher global food prices,
according to OECD estimates. The US Farm Bill brought in by the Bush
Administration in 2002 increased agricultural subsidies by 80% and
cost the US taxpayer 190 billion USD.. In 2003, the EU agreed to
extend the Common Agricultural Policy until 2013. Former UNDP
Administrator Malloch Brown renewed calls for reform of the farm
subsidies such as the CAP.

Crop shortfalls from natural disasters

Several distinct weather- and climate-related incidents have caused
disruptions in crop production. Perhaps the most influential is the
extended drought in Australia, in particular the fertile Murray-Darling
Basin, which produces large amounts of wheat and rice. The drought

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has caused the annual rice harvest to fall by as much as 98% from pre-
drought levels. Australia is historically the second-largest exporter of
wheat after the United States, producing up to 25 million tons in a
good year, the vast majority for export. However, the 2006 harvest
was 9.8 million. Other events that have negatively affected the price of
food include the 2006 heat wave in California's San Joaquin Valley,
which killed large numbers of farm animals, and unseasonable 2008
rains in Kerala, India, which destroyed swathes of grain. Scientists
have stated that several of these incidents are consistent with the
predicted effects of climate change.

POVERTY:
Poverty is the condition
of lacking basic human
needs such as nutrition,
clean water, health care,
clothing, and shelter
because of the inability
to afford them.

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Percentage of people living below the

poverty line
Europe and Central Asia
3.5%
Latin America and Caribbean
23.5%
Sub-Saharan Africa
38.5%
Middle East and North Africa
4.1%
South Asia
43.1%

“The amount of money the

UK spends
On chocolate each
Year
Could make Africa
NOT live in poverty”

EFFECTS OF POVERTY:
1. HEALTH
2. EDUCATION
3. UNEMPLOYMENT

4. FOOD
HOUSING

1. HEALTH

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Hunger, disease, and less education describe a person in poverty. One

third of deaths - some 18 million people a year or 50,000 per day - are
due to poverty-related causes: in total 270 million people, most of
them women and children, have died as a result of poverty since 1990.
Those living in poverty suffer disproportionately from hunger or even
starvation and disease. Those living in poverty suffer lower life
expectancy. According to the World Health Organization, hunger and
malnutrition are the single gravest threats to the world's public health
and malnutrition is by far the biggest contributor to child mortality,
present in half of all cases.

Education
Research has found that there is a high risk of educational
underachievement for children who are from low-income housing
circumstances. This often is a process that begins in primary school for
some less fortunate children. In the US educational system, these
children are at a higher risk than other children for retention in their
grade, special placements during the school’s hours and even not
completing their high school education. There are indeed many
explanations for why students tend to drop out of school. For children
with low resources, the risk factors are similar to excuses such as
juvenile delinquency rates, higher levels of teenage pregnancy, and
the economic dependency upon their low income parent or parents.

Housing
Slum-dwellers, who make up a third of the world's urban population,
live in a poverty no better, if not worse, than rural people, who are the
traditional focus of the poverty in the developing world, according to a
report by the United Nations.

Most of the children living in institutions around the world have a

surviving parent or close relative, and they most commonly entered
orphanages because of poverty. Experts and child advocates maintain
that orphanages are expensive and often harm children’s development
by separating them from their families. It is speculated that, flush with
money, orphanages are increasing and push for children to join even
though demographic data show that even the poorest extended
families usually take in children whose parents have died.

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ENERGY CRISIS:

An economic problem caused by a dwindling supply of energy, at an

increasing price.
OR
An energy crisis is any great price rise in the supply of energy
resources to an economy.

CAUSES OF ENERGY CRISIS

 Over-consumption.
 Aging infrastructure.
 Choke point disruption at oil refineries.
 Pipeline failures and other accidents may cause minor
interruptions to energy supplies.
 Damage in infrastructure from severe weather.
 Political events.

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TRADE CRISIS:

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The crisis occurs due to trade (Imports and Exports) of products or

goods is called Trade crisis.

CONDITION OF WORLD ECONOMY:

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For the first quarter of 2009,the annualized

rate of decline in GDP was:
1.
14.4% in Germany,
2. 15.2% in Japan,
3. 7.4% in the UK,
4. 9.8% in the Euro area
5. 21.5% for Mexico.

ECONOMIC CRISIS IN ASIA:

The global economic crisis that is upon us is the worst since
the 1930s.
The IMF now sees world growth for this year slowing to
0.5%. Industrialized economies will contract by more than
2%.
Exports being the main driver of growth, developing Asia is
facing a significant downturn.

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ECONOMIE CRISIS IN EUROPE:

Leaders from the 15-euro zone countries along with British
Prime Minister Gordon Brown met Oct. 12 to try to solve the
worldwide liquidity crisis. In a show of unity, the leaders
agreed on measures such as guaranteeing inter bank loans
for up to five years and buying stakes in banks.

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ECONOMIE CRISIS IN AFRICA:

After nearly a decade of steady growth rates of 5-7%, the
crisis is expected to make African nations’ growth negative.
More developed countries like South Africa have seen stock
market crashes and jumps in unemployment, as in the US
and Western Europe.

ECONOMIE CRISIS IN AUSTRALIA:

The Australian economy, based heavily on the export of
mineral resources, would be shielded by the unprecedented
growth of China, which until recently had been buying coal
and metal ores faster than they could be dug up.

INSITITUTE OF BUSINESS & TECHNOLOGY (BIZTEK)

 Asad Mazhar

INSITITUTE OF BUSINESS & TECHNOLOGY (BIZTEK)

 Asad Mazhar

INSITITUTE OF BUSINESS & TECHNOLOGY (BIZTEK)