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Bookmark and Share Dr Stephen Spratt is Director of nef‘s Centre for the Future Economy.

Before our eyes the financial crisis is accelerating into a downward spiral of nightmarish proportions. Today it was confirmed for the first time that the UK is officially in recession, as the effects begin to hit the real economy in earnest. Nobody expects things to get better before they get a lot, lot worse.

‘Decisive action’, we are told, is being taken to deal with the banks. The latest £50 billion guarantee package comes hard on the heels of the untold billions to ‘recapitalize’, or to provide ‘liquidity’, or just to keep the lights on a little longer in the hope that something turns up.

The government resembles a grimly optimistic hot air balloonist, spat out of a storm and crashing to earth while frantically pumping more and more hot air into the balloon, only to see it flow out of huge holes rent in the fabric of his craft. The pilot, lets call him Darling, will certainly delay the crash a little bit, but only at the cost of using up all of his gas. Once the basket hits the ground – in whatever battered shape – it will surely stay there.

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Bookmark and ShareEva Neitzert is a researcher on nef‘s Valuing What Matters programme.

The IMF bail-out packages for Iceland, Hungary and the Ukraine provoke more than a little déjà vu.

In the Asian crisis of 1997-98, the IMF stepped in with loans for the worst affected countries. These weren’t just ordinary loans, but required countries to implement the now notorious structural adjustment policies (SAP). In essence, SAPs required recipients of the loans to cut public spending, raise interest rates, restructure their financial systems, and remove trade protections.

Some astute commentators at the time noted that this seemed an odd cocktail to be prescribing. In America and the UK, the response to economic downturn is normally the opposite: public spending is raised and interest rates are cut with the aim of providing an economic stimulus. This is also what Gordon Brown and Alistair Darling have been proposing over the last few days.

So what happened to the Asian economies?

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nef employees blog in their personal capacity. The opinions expressed here do not necessarily reflect those of the new economics foundation.