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Prior to the rally, seven anti-China protestors were arrested in Hanoi after unfurling a banner and shouting "Boycott the Beijing Olympics" through a loudhailer at a market. A Vietnamese American was deported for planning protests against the torch, while a prominent blogger, Điếu Cày (real name Nguyễn Văn Hải), who blogged about protests around the world and who called for demonstrations in Vietnam, was arrested on charges of tax evasion. Outside Vietnam, there were protests by overseas Vietnamese in Paris, San Francisco and Canberra. Lê Minh Phiếu, a torchbearer who is a Vietnamese law student studying in France, wrote a letter to the president of the International Olympic Committee protesting China's "politicisation of the Olympics", citing maps of the torch relay at the official Beijing Olympic website depicting the disputed islands as Chinese territory and posted it on his blog. One day before the relay was to start, the official website appeared to have been updated to remove the disputed islands and dotted lines marking China's maritime claims in the South China Sea.
Hong Kong: The event was held in Hong Kong on May 2. In the ceremony held at the Hong Kong Cultural Centre in Tsim Sha Tsui, Chief Executive Donald Tsang handed the torch to the first torchbearer, Olympic medalist Lee Lai Shan. The torch relay then traveled through Nathan Road, Lantau Link, Sha Tin (crossed Shing Mun River via a dragon boat, which had been never used before in the history of Olympic torch relays), Victoria Harbour (crossed by Tin Hau, a VIP vessel managed by the Marine Department) before ending in Golden Bauhinia Square in Wan Chai. A total of 120 torchbearers were selected to participate in the event consisting of celebrities, athletes and pro-Beijing camp politicians. No politicians from the pro-democracy camp were selected as torchbearers. One torchbearer could not participate due to flight delay. It was estimated that more than 200,000 spectators came out and watched the relay. Many enthusiastic supporters wore red shirts and waved large Chinese flags. According to Hong Kong Chief Secretary for Administration Henry Tang, 3,000 police were deployed to ensure order.
There were several protests along the torch relay route. Members of the Hong Kong Alliance in Support of Patriotic Democratic Movements in China, including pro-democracy activist Szeto Wah, waved novelty inflatable plastic Olympic flames, which they said symbolised democracy. They wanted accountability for the Tiananmen Square protests of 1989 and the implementation of democracy in Hong Kong. Political activist and Legislative Council member Leung Kwok-hung (Longhair) also joined the protest, saying "I'm very proud that in Hong Kong we still have people brave enough to speak out." Pro-democracy activists were overwhelmed by a crowd of torch supporters with insults like "running dog," "traitor," "get out!," and "I love the Communist Party." At the same time, about 10 members of the Civil Human Rights Front had orange banners calling for human rights improvements and universal suffrage. Onlookers were saying "Aren't you Chinese?" in Mandarin putonghua as they tried to cover the orange banners with a large Chinese national flag. One woman had an orange sign that said, "Olympic flame for democracy", while a man carried a poster with a tank and the slogan "One world, two dreams". A university student and former RDHK radio host Christina Chan wrapped the Tibetan snow lion flag around her body and later began waving it. Several onlookers heckled Chan, shouting "What kind of Chinese are you?" and "What a shame!" In the end, she and some of the protesters were taken away against their will by the authorities via a police vehicle "for their own protection." Chan is currently[when?] suing the Hong Kong government, claiming her human rights were breached. (case number HCAL139/08)
The Color Orange democracy group, led by Danish sculptor Jens Galschiøt, originally planned to join the Hong Kong Alliance relay and paint the "Pillar of Shame", a structure he built in Hong Kong to commemorate the 1989 Tiananmen Square protests. However, Galschiøt and two other people were denied entry to Hong Kong on April 26, 2008 due to "immigration reasons" and were forced to leave Hong Kong. In response, Lee Cheuk Yan, vice chairman of the Hong Kong Alliance in Support of Patriotic Democratic Movements in China, said, "It's outrageous that the government is willing to sacrifice the image of Hong Kong because of the torch relay." Hollywood actress Mia Farrow was also briefly questioned at the Hong Kong airport though officials allowed her to enter. She later gave a speech criticizing China's relations with Sudan in Hong Kong, as there was also a small minority of people protesting about China's role in the crisis of Darfur. Legislator Cheung Man Kwong have also said the government's decision allowing Farrow to enter while denying others is a double standard and a violation to Hong Kong's one country, two systems policy.
Macao: The event was held in Macau on May 3. It was the first time that the Olympic torch had traveled to Macau. A ceremony was held at Macau Fisherman's Wharf. Afterward, the torch traveled through Macau, passing by a number of landmarks including A-Ma Temple, Macau Tower, Ponte Governador Nobre de Carvalho, Ponte de Sai Van, Macau Cultural Centre, Macau Stadium and then back to the Fisherman's Wharf for the closing ceremony. Parts of the route near Ruins of St. Paul's and Taipa was shortened due to large crowds of supporters blocking narrow streets. A total of 120 torchbearers participated in this event including casino tycoon Stanley Ho. Leong Hong Man and Leong Heng Teng were the first and last torchbearer in the relay respectively. An article published on Macao Daily News criticized that the list of the torchbearers could not fully represent the Macanese and that there were too many non-athletes among the torchbearers. (some of whom had already been torchbearers of other sporting events)
A Macau resident was arrested on April 26 for posting a message on cyberctm.com encouraging people to disrupt the relay. Both orchidbbs.com and cyberctm.com Internet forums were shut down from May 2 to 4. This fueled speculation that the shutdowns were targeting speeches against the relay. The head of the Bureau of Telecommunications Regulation has denied that the shutdowns of the websites were politically motivated. About 2,200 police were deployed on the streets, there were no interruptions.
China: The torch returned to China for the first time since April. The torch arrived in Sanya, Hainan on May 4 with celebrations attended by International Olympic Committee (IOC) officials and Chinese big names like Jackie Chan. The entire relay through Mainland China was largely a success with many people welcoming the arrival of the torch along the way.
The coverage of the events by the media came under scrutiny during the relay. Chinese media coverage of the torch relay has been distinct in a number of ways from coverage elsewhere. Western reporters in Beijing have described Chinese media coverage as partial and censored (for example when Chinese media did not broadcast Reporters Without Borders' disruption of the torch lighting ceremony), whereas Chinese netizens have in turn accused Western media coverage of being biased. The French newspaper Libération was criticised by the Chinese State press agency Xinhua for its allegedly biased reporting; Xinhua suggested that Libération needed "a stinging slap in the face" for having "insulted the Olympic flame" and "supported a handful of saboteurs".
In response to pro-Tibet and pro-human rights protests, the Chinese media focused on the more disruptive protesters, referring for example to "a very small number of 'Tibet independence' secessionists and a handful of so-called human rights-minded NGO activists" intent on "disrupting and sabotaging the Beijing Olympic Games". However, the Chinese media published articles about crowds supporting the torch relay.
Xinhua and CCTV quoted relay spectators who condemned the protests, to a greater extent than most Western media, but did not quote any alternate viewpoints, providing no coverage of support for the protests by some ordinary citizens in Western countries. It quoted athletes who expressed pride at taking part in the relays, to a greater extent than Western media, but not those who, like Marie-José Pérec, expressed understanding and support for the protestors. The Beijing Organising Committee for the Games mentioned the "smiling faces of the elderly, children and the artists on the streets", of cheering and supportive Londoners. Xinhua said that protesters were "radicals" who "trampled human rights" and whose activities were condemned by "the people of the world who cordially love the Olympic spirit".
Reports on the Delhi relay were similarly distinct. Despite intended torchbearers Kiran Bedi, Soha Ali Khan, Sachin Tendulkar and Bhaichung Bhutia all withdrawing from the event, the official Chinese website for the relay reported "Indian torchbearers vow to run for spirit of Olympics", and quoted torchbearers Manavjit Singh Sandhu, Abhinav Bindra, Ayaan Ali Khan and Rajinder Singh Rahelu all stating that sports and politics should not be mixed.
Some Western media have reported on Chinese accusations of Western media bias. The Daily Telegraph published an opinion piece by the Chinese ambassador to the United Kingdom, Fu Ying, who accused Western media of "demonising" China during their coverage of the torch relays. The Telegraph also asked its readers to send their views in response to the question "Is the West demonising China?" The BBC reported on a demonstration in Sydney by Chinese Australians "voicing support for Beijing amid controversy over Tibet" and protesting against what they saw as Western media bias. The report showed demonstrators carrying signs which read "Shame on some Western media", "BBC CNN lies too" and "Stop media distortion!". One demonstrator interviewed by the BBC stated: "I saw some news from CNN, from the BBC, some media [inaudible], and they are just lying." Libération also reported that it had been accused of bias by the Chinese media.
On April 17, Xinhua condemned what it called "biased coverage of the Lhasa riots and the Olympic torch relay by the U.S.-based Cable News Network (CNN)". The same day, the Chinese government called on CNN to "apologise" for having allegedly insulted the Chinese people, and for "attempting to incite the Chinese people against the government". CNN issued a statement on April 14, responded to China over 'thugs and goons' comment by Jack Cafferty.
On April 19, the BBC reported that 1,300 people had gathered outside BBC buildings in Manchester and London, protesting against what they described as Western media bias. Several days earlier, the BBC had published an article entitled "The challenges of reporting in China", responding to earlier criticism. The BBC's Paul Danahar noted that Chinese people were now "able to access the BBC News website for the first time, after years of strict censorship", and that "many were critical of our coverage". He provided readers with a reminder of censorship in China, and added: "People who criticise the media for their coverage in Tibet should acknowledge that we were and still are banned from reporting there." He also quoted critical Chinese responses, and invited readers to comment.
On April 20, the People's Daily published a report entitled "Overseas Chinese rally against biased media coverage, for Olympics". It included images of Chinese people demonstrating in France, the United Kingdom, Germany and the United States. One picture showed Chinese demonstrators holding a sign which claimed, incorrectly, that the BBC had not reported on Jin Jing. The People's Daily quoted one protestor who claimed the "BBC on some of the recent events has misled the British public and the rest of the world by providing intensive untruthful reports and biased coverage."
On April 4, it was reported that the Chinese government appeared to be running an anti-CNN website that criticizes the cable network’s coverage of recent events. The site claims to have been created by a Beijing citizen. However, foreign correspondents in Beijing voiced suspicions that Anti-cnn may be a semi-government-made website. A Chinese government spokesman insisted the site was spontaneously set up by a Chinese citizen angered over media coverage.
The Beijing Olympic Organizing Committee sent out a team of 30 unarmed attendants selected from the People's Armed Police to escort the flame throughout its journey. According to Asian Times, sworn in as the "Beijing Olympic Games Sacred Flame Protection Unit" during a ceremony in August 2007, their main job is to keep the Olympic flame alight throughout the journey and to assist in transferring the flame between the torches, the lanterns and the cauldrons. They wear matching blue tracksuits and are intended to accompany the torch every step of the way. One of the torch attendants, dubbed "Second Right Brother," has developed a significant online fan-base, particularly among China's female netizens.
In China, a call to boycott French hypermart Carrefour from May 1 began spreading through mobile text messaging and online chat rooms amongst the Chinese over the weekend from April 12, accusing the company's major shareholder, the LVMH Group, of donating funds to the Dalai Lama. There were also calls to extend the boycott to include French luxury goods and cosmetic products. Chinese protesters organized boycotts of the French-owned retail chain Carrefour in major Chinese cities including Kunming, Hefei and Wuhan, accusing the French nation of pro-secessionist conspiracy and anti-Chinese racism. Some burned French flags, some added Swastika (due to its conotaions with Nazism) to the French flag, and spread short online messages calling for large protests in front of French consulates and embassy. Some shoppers who insisted on entering one of the Carrefour stores in Kunming were blocked by boycotters wielding large Chinese flags and hit by water bottles. Hundreds of people joined Anti-French rallies in Beijing, Wuhan, Hefei, Kunming and Qingdao, which quickly spread to other cities like Xi'an, Harbin and Jinan. Carrefour denied any support or involvement in the Tibetan issue, and had its staff in its Chinese stores wear uniforms emblazoned with the Chinese national flag and caps with Olympic insignia and as well as the words "Beijing 2008" to show its support for the games. The effort had to be ceased when the BOCOG deemed the use of official Olympic insignia as illegal and a violation of copyright.
In response to the demonstrations, the Chinese government attempted to calm the situation, possibly fearing the protests may spiral out of control as has happened in recent years, including the anti-Japanese protests in 2005. State media and commentaries began to call for calm, such as an editorial in the People's Daily which urged Chinese people to "express [their] patriotic enthusiasm calmly and rationally, and express patriotic aspiration in an orderly and legal manner". The government also began to patrol and censor the internet forums such as Sohu.com, with comments related to the Carrefour boycott removed. In the days prior to the planned boycott, evidence of efforts by Chinese authorities to choke the mass boycott's efforts online became even more evident, including barring searches of words related to the French protests, but protests broke out nonetheless in front of Carrefour's stores at Beijing, Changsha, Fuzhou and Shenyang on May 1.
In Japan, the Mayor of Nagano, Shoichi Washizawa said that it has become a "great nuisance" for the city to host the torch relay prior to the Nagano leg. Washizawa's aides said the mayor's remark was not criticism about the relay itself but about the potential disruptions and confusion surrounding it. A city employee of the Nagano City Office ridiculed the protests in Europe, he said "They are doing something foolish", in a televised interview. Nagano City officially apologized later and explained what he had wanted to say was "Such violent protests were not easy to accept". Also citing concerns about protests as well as the recent violence in Tibet, a major Buddhist temple in Nagano cancelled its plans to host the opening stage of the Olympic torch relay, this temple was vandalised by an un-identified person the day after in apparent revenge,
The Olympic Flame is supposed to remain lit for the whole relay. When the Torch is extinguished at night, on airplanes, in bad weather, or during protests (such as the several occasions in Paris), the Olympic Flame is kept alight in a set of 8 lanterns.[citation needed]
A union planned to protest at the relay for better living conditions. Hong Kong legislator Michael Mak Kwok-fung and activist Chan Cheong, both members of the League of Social Democrats, were not allowed to enter Macau.
Chinese media have also reported on Jin Jing, whom the official Chinese torch relay website described as "heroic" and an "angel", whereas Western media initially gave her little mention – despite a Chinese claim that "Chinese Paralympic athlete Jin Jing has garnered much attention from the media".
Two additional teams of 40 attendants each will accompany the flame on its Mainland China route. This arrangement has however sparked several controversies.
The ultimate substantive legacy of Principia Mathematica is mixed. It is generally accepted that Kurt Gödel's incompleteness theorem of 1931 definitively demonstrated that for any set of axioms and inference rules proposed to encapsulate mathematics, there would in fact be some truths of mathematics which could not be deduced from them, and hence that Principia Mathematica could never achieve its aims. However, Gödel could not have come to this conclusion without Whitehead and Russell's book. In this way, Principia Mathematica's legacy might be described as its key role in disproving the possibility of achieving its own stated goals. But beyond this somewhat ironic legacy, the book popularized modern mathematical logic and drew important connections between logic, epistemology, and metaphysics.
Whitehead's most complete work on education is the 1929 book The Aims of Education and Other Essays, which collected numerous essays and addresses by Whitehead on the subject published between 1912 and 1927. The essay from which Aims of Education derived its name was delivered as an address in 1916 when Whitehead was president of the London Branch of the Mathematical Association. In it, he cautioned against the teaching of what he called "inert ideas" – ideas that are disconnected scraps of information, with no application to real life or culture. He opined that "education with inert ideas is not only useless: it is, above all things, harmful."
Rather than teach small parts of a large number of subjects, Whitehead advocated teaching a relatively few important concepts that the student could organically link to many different areas of knowledge, discovering their application in actual life. For Whitehead, education should be the exact opposite of the multidisciplinary, value-free school model – it should be transdisciplinary, and laden with values and general principles that provide students with a bedrock of wisdom and help them to make connections between areas of knowledge that are usually regarded as separate.
Whitehead did not begin his career as a philosopher. In fact, he never had any formal training in philosophy beyond his undergraduate education. Early in his life he showed great interest in and respect for philosophy and metaphysics, but it is evident that he considered himself a rank amateur. In one letter to his friend and former student Bertrand Russell, after discussing whether science aimed to be explanatory or merely descriptive, he wrote: "This further question lands us in the ocean of metaphysic, onto which my profound ignorance of that science forbids me to enter." Ironically, in later life Whitehead would become one of the 20th century's foremost metaphysicians.
Whitehead was unimpressed by this objection. In the notes of one his students for a 1927 class, Whitehead was quoted as saying: "Every scientific man in order to preserve his reputation has to say he dislikes metaphysics. What he means is he dislikes having his metaphysics criticized." In Whitehead's view, scientists and philosophers make metaphysical assumptions about how the universe works all the time, but such assumptions are not easily seen precisely because they remain unexamined and unquestioned. While Whitehead acknowledged that "philosophers can never hope finally to formulate these metaphysical first principles," he argued that people need to continually re-imagine their basic assumptions about how the universe works if philosophy and science are to make any real progress, even if that progress remains permanently asymptotic. For this reason Whitehead regarded metaphysical investigations as essential to both good science and good philosophy.
Perhaps foremost among what Whitehead considered faulty metaphysical assumptions was the Cartesian idea that reality is fundamentally constructed of bits of matter that exist totally independently of one another, which he rejected in favor of an event-based or "process" ontology in which events are primary and are fundamentally interrelated and dependent on one another. He also argued that the most basic elements of reality can all be regarded as experiential, indeed that everything is constituted by its experience. He used the term "experience" very broadly, so that even inanimate processes such as electron collisions are said to manifest some degree of experience. In this, he went against Descartes' separation of two different kinds of real existence, either exclusively material or else exclusively mental. Whitehead referred to his metaphysical system as "philosophy of organism", but it would become known more widely as "process philosophy."
In Whitehead's view, then, concepts such as "quality", "matter", and "form" are problematic. These "classical" concepts fail to adequately account for change, and overlook the active and experiential nature of the most basic elements of the world. They are useful abstractions, but are not the world's basic building blocks. What is ordinarily conceived of as a single person, for instance, is philosophically described as a continuum of overlapping events. After all, people change all the time, if only because they have aged by another second and had some further experience. These occasions of experience are logically distinct, but are progressively connected in what Whitehead calls a "society" of events. By assuming that enduring objects are the most real and fundamental things in the universe, materialists have mistaken the abstract for the concrete (what Whitehead calls the "fallacy of misplaced concreteness").
To put it another way, a thing or person is often seen as having a "defining essence" or a "core identity" that is unchanging, and describes what the thing or person really is. In this way of thinking, things and people are seen as fundamentally the same through time, with any changes being qualitative and secondary to their core identity (e.g. "Mark's hair has turned gray as he has gotten older, but he is still the same person"). But in Whitehead's cosmology, the only fundamentally existent things are discrete "occasions of experience" that overlap one another in time and space, and jointly make up the enduring person or thing. On the other hand, what ordinary thinking often regards as "the essence of a thing" or "the identity/core of a person" is an abstract generalization of what is regarded as that person or thing's most important or salient features across time. Identities do not define people, people define identities. Everything changes from moment to moment, and to think of anything as having an "enduring essence" misses the fact that "all things flow", though it is often a useful way of speaking.
Whitehead pointed to the limitations of language as one of the main culprits in maintaining a materialistic way of thinking, and acknowledged that it may be difficult to ever wholly move past such ideas in everyday speech. After all, each moment of each person's life can hardly be given a different proper name, and it is easy and convenient to think of people and objects as remaining fundamentally the same things, rather than constantly keeping in mind that each thing is a different thing from what it was a moment ago. Yet the limitations of everyday living and everyday speech should not prevent people from realizing that "material substances" or "essences" are a convenient generalized description of a continuum of particular, concrete processes. No one questions that a ten-year-old person is quite different by the time he or she turns thirty years old, and in many ways is not the same person at all; Whitehead points out that it is not philosophically or ontologically sound to think that a person is the same from one second to the next.
A second problem with materialism is that it obscures the importance of relations. It sees every object as distinct and discrete from all other objects. Each object is simply an inert clump of matter that is only externally related to other things. The idea of matter as primary makes people think of objects as being fundamentally separate in time and space, and not necessarily related to anything. But in Whitehead's view, relations take a primary role, perhaps even more important than the relata themselves. A student taking notes in one of Whitehead's fall 1924 classes wrote that:
In fact, Whitehead describes any entity as in some sense nothing more and nothing less than the sum of its relations to other entities – its synthesis of and reaction to the world around it. A real thing is just that which forces the rest of the universe to in some way conform to it; that is to say, if theoretically a thing made strictly no difference to any other entity (i.e. it was not related to any other entity), it could not be said to really exist. Relations are not secondary to what a thing is, they are what the thing is.
Isabelle Stengers wrote that "Whiteheadians are recruited among both philosophers and theologians, and the palette has been enriched by practitioners from the most diverse horizons, from ecology to feminism, practices that unite political struggle and spirituality with the sciences of education." Indeed, in recent decades attention to Whitehead's work has become more widespread, with interest extending to intellectuals in Europe and China, and coming from such diverse fields as ecology, physics, biology, education, economics, and psychology. One of the first theologians to attempt to interact with Whitehead's thought was the future Archbishop of Canterbury, William Temple. In Temple's Gifford Lectures of 1932-1934 (subsequently published as "Nature, Man and God"), Whitehead is one of a number of philosophers of the emergent evolution approach Temple interacts with. However, it was not until the 1970s and 1980s that Whitehead's thought drew much attention outside of a small group of philosophers and theologians, primarily Americans, and even today he is not considered especially influential outside of relatively specialized circles.
Early followers of Whitehead were found primarily at the University of Chicago's Divinity School, where Henry Nelson Wieman initiated an interest in Whitehead's work that would last for about thirty years. Professors such as Wieman, Charles Hartshorne, Bernard Loomer, Bernard Meland, and Daniel Day Williams made Whitehead's philosophy arguably the most important intellectual thread running through the Divinity School. They taught generations of Whitehead scholars, the most notable of which is John B. Cobb, Jr.
But while Claremont remains the most concentrated hub of Whiteheadian activity, the place where Whitehead's thought currently seems to be growing the most quickly is in China. In order to address the challenges of modernization and industrialization, China has begun to blend traditions of Taoism, Buddhism, and Confucianism with Whitehead's "constructive post-modern" philosophy in order to create an "ecological civilization." To date, the Chinese government has encouraged the building of twenty-three university-based centers for the study of Whitehead's philosophy, and books by process philosophers John Cobb and David Ray Griffin are becoming required reading for Chinese graduate students. Cobb has attributed China's interest in process philosophy partly to Whitehead's stress on the mutual interdependence of humanity and nature, as well as his emphasis on an educational system that includes the teaching of values rather than simply bare facts.
Deleuze's and Latour's opinions, however, are minority ones, as Whitehead has not been recognized as particularly influential within the most dominant philosophical schools. It is impossible to say exactly why Whitehead's influence has not been more widespread, but it may be partly due to his metaphysical ideas seeming somewhat counter-intuitive (such as his assertion that matter is an abstraction), or his inclusion of theistic elements in his philosophy, or the perception of metaphysics itself as passé, or simply the sheer difficulty and density of his prose.
One philosophical school which has historically had a close relationship with process philosophy is American pragmatism. Whitehead himself thought highly of William James and John Dewey, and acknowledged his indebtedness to them in the preface to Process and Reality. Charles Hartshorne (along with Paul Weiss) edited the collected papers of Charles Sanders Peirce, one of the founders of pragmatism. Noted neopragmatist Richard Rorty was in turn a student of Hartshorne. Today, Nicholas Rescher is one example of a philosopher who advocates both process philosophy and pragmatism.
In physics, Whitehead's thought has had some influence. He articulated a view that might perhaps be regarded as dual to Einstein's general relativity, see Whitehead's theory of gravitation. It has been severely criticized. Yutaka Tanaka, who suggests that the gravitational constant disagrees with experimental findings, proposes that Einstein's work does not actually refute Whitehead's formulation. Whitehead's view has now been rendered obsolete, with the discovery of gravitational waves. They are phenonena observed locally that largely violate the kind of local flatness of space that Whitehead assumes. Consequently, Whitehead's cosmology must be regarded as a local approximation, and his assumption of a uniform spatio-temporal geometry, Minkowskian in particular, as an often-locally-adequate approximation. An exact replacement of Whitehead's cosmology would need to admit a Riemannian geometry. Also, although Whitehead himself gave only secondary consideration to quantum theory, his metaphysics of processes has proved attractive to some physicists in that field. Henry Stapp and David Bohm are among those whose work has been influenced by Whitehead.
This work has been pioneered by John B. Cobb, Jr., whose book Is It Too Late? A Theology of Ecology (1971) was the first single-authored book in environmental ethics. Cobb also co-authored a book with economist Herman Daly entitled For the Common Good: Redirecting the Economy toward Community, the Environment, and a Sustainable Future (1989), which applied Whitehead's thought to economics, and received the Grawemeyer Award for Ideas Improving World Order. Cobb followed this with a second book, Sustaining the Common Good: A Christian Perspective on the Global Economy (1994), which aimed to challenge "economists' zealous faith in the great god of growth."
Another model is the FEELS model developed by Xie Bangxiu and deployed successfully in China. "FEELS" stands for five things in curriculum and education: Flexible-goals, Engaged-learner, Embodied-knowledge, Learning-through-interactions, and Supportive-teacher. It is used for understanding and evaluating educational curriculum under the assumption that the purpose of education is to "help a person become whole." This work is in part the product of cooperation between Chinese government organizations and the Institute for the Postmodern Development of China.
Whitehead has had some influence on philosophy of business administration and organizational theory. This has led in part to a focus on identifying and investigating the effect of temporal events (as opposed to static things) within organizations through an “organization studies” discourse that accommodates a variety of 'weak' and 'strong' process perspectives from a number of philosophers. One of the leading figures having an explicitly Whiteheadian and panexperientialist stance towards management is Mark Dibben, who works in what he calls "applied process thought" to articulate a philosophy of management and business administration as part of a wider examination of the social sciences through the lens of process metaphysics. For Dibben, this allows "a comprehensive exploration of life as perpetually active experiencing, as opposed to occasional – and thoroughly passive – happening." Dibben has published two books on applied process thought, Applied Process Thought I: Initial Explorations in Theory and Research (2008), and Applied Process Thought II: Following a Trail Ablaze (2009), as well as other papers in this vein in the fields of philosophy of management and business ethics.
Beginning in the late 1910s and early 1920s, Whitehead gradually turned his attention from mathematics to philosophy of science, and finally to metaphysics. He developed a comprehensive metaphysical system which radically departed from most of western philosophy. Whitehead argued that reality consists of processes rather than material objects, and that processes are best defined by their relations with other processes, thus rejecting the theory that reality is fundamentally constructed by bits of matter that exist independently of one another. Today Whitehead's philosophical works – particularly Process and Reality – are regarded as the foundational texts of process philosophy.
Alfred North Whitehead was born in Ramsgate, Kent, England, in 1861. His father, Alfred Whitehead, was a minister and schoolmaster of Chatham House Academy, a successful school for boys established by Thomas Whitehead, Alfred North's grandfather. Whitehead himself recalled both of them as being very successful schoolmasters, but that his grandfather was the more extraordinary man. Whitehead's mother was Maria Sarah Whitehead, formerly Maria Sarah Buckmaster. Whitehead was apparently not particularly close with his mother, as he never mentioned her in any of his writings, and there is evidence that Whitehead's wife, Evelyn, had a low opinion of her.
In 1918 Whitehead's academic responsibilities began to seriously expand as he accepted a number of high administrative positions within the University of London system, of which Imperial College London was a member at the time. He was elected Dean of the Faculty of Science at the University of London in late 1918 (a post he held for four years), a member of the University of London's Senate in 1919, and chairman of the Senate's Academic (leadership) Council in 1920, a post which he held until he departed for America in 1924. Whitehead was able to exert his newfound influence to successfully lobby for a new history of science department, help establish a Bachelor of Science degree (previously only Bachelor of Arts degrees had been offered), and make the school more accessible to less wealthy students.
The two volume biography of Whitehead by Victor Lowe is the most definitive presentation of the life of Whitehead. However, many details of Whitehead's life remain obscure because he left no Nachlass; his family carried out his instructions that all of his papers be destroyed after his death. Additionally, Whitehead was known for his "almost fanatical belief in the right to privacy", and for writing very few personal letters of the kind that would help to gain insight on his life. This led to Lowe himself remarking on the first page of Whitehead's biography, "No professional biographer in his right mind would touch him."
In addition to numerous articles on mathematics, Whitehead wrote three major books on the subject: A Treatise on Universal Algebra (1898), Principia Mathematica (co-written with Bertrand Russell and published in three volumes between 1910 and 1913), and An Introduction to Mathematics (1911). The former two books were aimed exclusively at professional mathematicians, while the latter book was intended for a larger audience, covering the history of mathematics and its philosophical foundations. Principia Mathematica in particular is regarded as one of the most important works in mathematical logic of the 20th century.
At the time structures such as Lie algebras and hyperbolic quaternions drew attention to the need to expand algebraic structures beyond the associatively multiplicative class. In a review Alexander Macfarlane wrote: "The main idea of the work is not unification of the several methods, nor generalization of ordinary algebra so as to include them, but rather the comparative study of their several structures." In a separate review, G. B. Mathews wrote, "It possesses a unity of design which is really remarkable, considering the variety of its themes."
Whitehead and Russell had thought originally that Principia Mathematica would take a year to complete; it ended up taking them ten years. To add insult to injury, when it came time for publication, the three-volume work was so massive (more than 2,000 pages) and its audience so narrow (professional mathematicians) that it was initially published at a loss of 600 pounds, 300 of which was paid by Cambridge University Press, 200 by the Royal Society of London, and 50 apiece by Whitehead and Russell themselves. Despite the initial loss, today there is likely no major academic library in the world which does not hold a copy of Principia Mathematica.
This is not to say that Whitehead's thought was widely accepted or even well-understood. His philosophical work is generally considered to be among the most difficult to understand in all of the western canon. Even professional philosophers struggled to follow Whitehead's writings. One famous story illustrating the level of difficulty of Whitehead's philosophy centers around the delivery of Whitehead's Gifford lectures in 1927–28 – following Arthur Eddington's lectures of the year previous – which Whitehead would later publish as Process and Reality:
However, Mathews' frustration with Whitehead's books did not negatively affect his interest. In fact, there were numerous philosophers and theologians at Chicago's Divinity School that perceived the importance of what Whitehead was doing without fully grasping all of the details and implications. In 1927 they invited one of America's only Whitehead experts – Henry Nelson Wieman – to Chicago to give a lecture explaining Whitehead's thought. Wieman's lecture was so brilliant that he was promptly hired to the faculty and taught there for twenty years, and for at least thirty years afterward Chicago's Divinity School was closely associated with Whitehead's thought.
Wieman's words proved prophetic. Though Process and Reality has been called "arguably the most impressive single metaphysical text of the twentieth century," it has been little-read and little-understood, partly because it demands – as Isabelle Stengers puts it – "that its readers accept the adventure of the questions that will separate them from every consensus." Whitehead questioned western philosophy's most dearly held assumptions about how the universe works, but in doing so he managed to anticipate a number of 21st century scientific and philosophical problems and provide novel solutions.
It must be emphasized, however, that an entity is not merely a sum of its relations, but also a valuation of them and reaction to them. For Whitehead, creativity is the absolute principle of existence, and every entity (whether it is a human being, a tree, or an electron) has some degree of novelty in how it responds to other entities, and is not fully determined by causal or mechanistic laws. Of course, most entities do not have consciousness. As a human being's actions cannot always be predicted, the same can be said of where a tree's roots will grow, or how an electron will move, or whether it will rain tomorrow. Moreover, inability to predict an electron's movement (for instance) is not due to faulty understanding or inadequate technology; rather, the fundamental creativity/freedom of all entities means that there will always remain phenomena that are unpredictable.
Since Whitehead's metaphysics described a universe in which all entities experience, he needed a new way of describing perception that was not limited to living, self-conscious beings. The term he coined was "prehension", which comes from the Latin prehensio, meaning "to seize." The term is meant to indicate a kind of perception that can be conscious or unconscious, applying to people as well as electrons. It is also intended to make clear Whitehead's rejection of the theory of representative perception, in which the mind only has private ideas about other entities. For Whitehead, the term "prehension" indicates that the perceiver actually incorporates aspects of the perceived thing into itself. In this way, entities are constituted by their perceptions and relations, rather than being independent of them. Further, Whitehead regards perception as occurring in two modes, causal efficacy (or "physical prehension") and presentational immediacy (or "conceptual prehension").
Whitehead describes causal efficacy as "the experience dominating the primitive living organisms, which have a sense for the fate from which they have emerged, and the fate towards which they go." It is, in other words, the sense of causal relations between entities, a feeling of being influenced and affected by the surrounding environment, unmediated by the senses. Presentational immediacy, on the other hand, is what is usually referred to as "pure sense perception", unmediated by any causal or symbolic interpretation, even unconscious interpretation. In other words, it is pure appearance, which may or may not be delusive (e.g. mistaking an image in a mirror for "the real thing").
In higher organisms (like people), these two modes of perception combine into what Whitehead terms "symbolic reference", which links appearance with causation in a process that is so automatic that both people and animals have difficulty refraining from it. By way of illustration, Whitehead uses the example of a person's encounter with a chair. An ordinary person looks up, sees a colored shape, and immediately infers that it is a chair. However, an artist, Whitehead supposes, "might not have jumped to the notion of a chair", but instead "might have stopped at the mere contemplation of a beautiful color and a beautiful shape." This is not the normal human reaction; most people place objects in categories by habit and instinct, without even thinking about it. Moreover, animals do the same thing. Using the same example, Whitehead points out that a dog "would have acted immediately on the hypothesis of a chair and would have jumped onto it by way of using it as such." In this way symbolic reference is a fusion of pure sense perceptions on the one hand and causal relations on the other, and that it is in fact the causal relationships that dominate the more basic mentality (as the dog illustrates), while it is the sense perceptions which indicate a higher grade mentality (as the artist illustrates).
Whitehead makes the startling observation that "life is comparatively deficient in survival value." If humans can only exist for about a hundred years, and rocks for eight hundred million, then one is forced to ask why complex organisms ever evolved in the first place; as Whitehead humorously notes, "they certainly did not appear because they were better at that game than the rocks around them." He then observes that the mark of higher forms of life is that they are actively engaged in modifying their environment, an activity which he theorizes is directed toward the three-fold goal of living, living well, and living better. In other words, Whitehead sees life as directed toward the purpose of increasing its own satisfaction. Without such a goal, he sees the rise of life as totally unintelligible.
Whitehead's idea of God differs from traditional monotheistic notions. Perhaps his most famous and pointed criticism of the Christian conception of God is that "the Church gave unto God the attributes which belonged exclusively to Caesar." Here Whitehead is criticizing Christianity for defining God as primarily a divine king who imposes his will on the world, and whose most important attribute is power. As opposed to the most widely accepted forms of Christianity, Whitehead emphasized an idea of God that he called "the brief Galilean vision of humility":
It should be emphasized, however, that for Whitehead God is not necessarily tied to religion. Rather than springing primarily from religious faith, Whitehead saw God as necessary for his metaphysical system. His system required that an order exist among possibilities, an order that allowed for novelty in the world and provided an aim to all entities. Whitehead posited that these ordered potentials exist in what he called the primordial nature of God. However, Whitehead was also interested in religious experience. This led him to reflect more intensively on what he saw as the second nature of God, the consequent nature. Whitehead's conception of God as a "dipolar" entity has called for fresh theological thinking.
God's consequent nature, on the other hand, is anything but unchanging – it is God's reception of the world's activity. As Whitehead puts it, "[God] saves the world as it passes into the immediacy of his own life. It is the judgment of a tenderness which loses nothing that can be saved." In other words, God saves and cherishes all experiences forever, and those experiences go on to change the way God interacts with the world. In this way, God is really changed by what happens in the world and the wider universe, lending the actions of finite creatures an eternal significance.
Whitehead thus sees God and the world as fulfilling one another. He sees entities in the world as fluent and changing things that yearn for a permanence which only God can provide by taking them into God's self, thereafter changing God and affecting the rest of the universe throughout time. On the other hand, he sees God as permanent but as deficient in actuality and change: alone, God is merely eternally unrealized possibilities, and requires the world to actualize them. God gives creatures permanence, while the creatures give God actuality and change. Here it is worthwhile to quote Whitehead at length:
For Whitehead the core of religion was individual. While he acknowledged that individuals cannot ever be fully separated from their society, he argued that life is an internal fact for its own sake before it is an external fact relating to others. His most famous remark on religion is that "religion is what the individual does with his own solitariness ... and if you are never solitary, you are never religious." Whitehead saw religion as a system of general truths that transformed a person's character. He took special care to note that while religion is often a good influence, it is not necessarily good – an idea which he called a "dangerous delusion" (e.g., a religion might encourage the violent extermination of a rival religion's adherents).
However, while Whitehead saw religion as beginning in solitariness, he also saw religion as necessarily expanding beyond the individual. In keeping with his process metaphysics in which relations are primary, he wrote that religion necessitates the realization of "the value of the objective world which is a community derivative from the interrelations of its component individuals." In other words, the universe is a community which makes itself whole through the relatedness of each individual entity to all the others – meaning and value do not exist for the individual alone, but only in the context of the universal community. Whitehead writes further that each entity "can find no such value till it has merged its individual claim with that of the objective universe. Religion is world-loyalty. The spirit at once surrenders itself to this universal claim and appropriates it for itself." In this way the individual and universal/social aspects of religion are mutually dependent.
Overall, however, Whitehead's influence is very difficult to characterize. In English-speaking countries, his primary works are little-studied outside of Claremont and a select number of liberal graduate-level theology and philosophy programs. Outside of these circles his influence is relatively small and diffuse, and has tended to come chiefly through the work of his students and admirers rather than Whitehead himself. For instance, Whitehead was a teacher and long-time friend and collaborator of Bertrand Russell, and he also taught and supervised the dissertation of Willard Van Orman Quine, both of whom are important figures in analytic philosophy – the dominant strain of philosophy in English-speaking countries in the 20th century. Whitehead has also had high-profile admirers in the continental tradition, such as French post-structuralist philosopher Gilles Deleuze, who once dryly remarked of Whitehead that "he stands provisionally as the last great Anglo-American philosopher before Wittgenstein's disciples spread their misty confusion, sufficiency, and terror." French sociologist and anthropologist Bruno Latour even went so far as to call Whitehead "the greatest philosopher of the 20th century."
Historically Whitehead's work has been most influential in the field of American progressive theology. The most important early proponent of Whitehead's thought in a theological context was Charles Hartshorne, who spent a semester at Harvard as Whitehead's teaching assistant in 1925, and is widely credited with developing Whitehead's process philosophy into a full-blown process theology. Other notable process theologians include John B. Cobb, Jr., David Ray Griffin, Marjorie Hewitt Suchocki, C. Robert Mesle, Roland Faber, and Catherine Keller.
Process theology typically stresses God's relational nature. Rather than seeing God as impassive or emotionless, process theologians view God as "the fellow sufferer who understands", and as the being who is supremely affected by temporal events. Hartshorne points out that people would not praise a human ruler who was unaffected by either the joys or sorrows of his followers – so why would this be a praise-worthy quality in God? Instead, as the being who is most affected by the world, God is the being who can most appropriately respond to the world. However, process theology has been formulated in a wide variety of ways. C. Robert Mesle, for instance, advocates a "process naturalism", i.e. a process theology without God.
In fact, process theology is difficult to define because process theologians are so diverse and transdisciplinary in their views and interests. John B. Cobb, Jr. is a process theologian who has also written books on biology and economics. Roland Faber and Catherine Keller integrate Whitehead with poststructuralist, postcolonialist, and feminist theory. Charles Birch was both a theologian and a geneticist. Franklin I. Gamwell writes on theology and political theory. In Syntheism - Creating God in The Internet Age, futurologists Alexander Bard and Jan Söderqvist repeatedly credit Whitehead for the process theology they see rising out of the participatory culture expected to dominate the digital era.
Whitehead also described religion more technically as "an ultimate craving to infuse into the insistent particularity of emotion that non-temporal generality which primarily belongs to conceptual thought alone." In other words, religion takes deeply felt emotions and contextualizes them within a system of general truths about the world, helping people to identify their wider meaning and significance. For Whitehead, religion served as a kind of bridge between philosophy and the emotions and purposes of a particular society. It is the task of religion to make philosophy applicable to the everyday lives of ordinary people.
Margaret Stout and Carrie M. Staton have also written recently on the mutual influence of Whitehead and Mary Parker Follett, a pioneer in the fields of organizational theory and organizational behavior. Stout and Staton see both Whitehead and Follett as sharing an ontology that "understands becoming as a relational process; difference as being related, yet unique; and the purpose of becoming as harmonizing difference." This connection is further analyzed by Stout and Jeannine M. Love in Integrative Process: Follettian Thinking from Ontology to Administration
Moreover, a conflict of interest between professional investment managers and their institutional clients, combined with a global glut in investment capital, led to bad investments by asset managers in over-priced credit assets. Professional investment managers generally are compensated based on the volume of client assets under management. There is, therefore, an incentive for asset managers to expand their assets under management in order to maximize their compensation. As the glut in global investment capital caused the yields on credit assets to decline, asset managers were faced with the choice of either investing in assets where returns did not reflect true credit risk or returning funds to clients. Many asset managers chose to continue to invest client funds in over-priced (under-yielding) investments, to the detriment of their clients, in order to maintain their assets under management. This choice was supported by a "plausible deniability" of the risks associated with subprime-based credit assets because the loss experience with early "vintages" of subprime loans was so low.
The first visible institution to run into trouble in the United States was the Southern California–based IndyMac, a spin-off of Countrywide Financial. Before its failure, IndyMac Bank was the largest savings and loan association in the Los Angeles market and the seventh largest mortgage originator in the United States. The failure of IndyMac Bank on July 11, 2008, was the fourth largest bank failure in United States history up until the crisis precipitated even larger failures, and the second largest failure of a regulated thrift. IndyMac Bank's parent corporation was IndyMac Bancorp until the FDIC seized IndyMac Bank. IndyMac Bancorp filed for Chapter 7 bankruptcy in July 2008.
IndyMac reported that during April 2008, Moody's and Standard & Poor's downgraded the ratings on a significant number of Mortgage-backed security (MBS) bonds including $160 million of those issued by IndyMac and which the bank retained in its MBS portfolio. IndyMac concluded that these downgrades would have negatively impacted the Company's risk-based capital ratio as of June 30, 2008. Had these lowered ratings been in effect at March 31, 2008, IndyMac concluded that the bank's capital ratio would have been 9.27% total risk-based. IndyMac warned that if its regulators found its capital position to have fallen below "well capitalized" (minimum 10% risk-based capital ratio) to "adequately capitalized" (8–10% risk-based capital ratio) the bank might no longer be able to use brokered deposits as a source of funds.
Senator Charles Schumer (D-NY) would later point out that brokered deposits made up more than 37 percent of IndyMac's total deposits and ask the Federal Deposit Insurance Corporation (FDIC) whether it had considered ordering IndyMac to reduce its reliance on these deposits. With $18.9 billion in total deposits reported on March 31, Senator Schumer would have been referring to a little over $7 billion in brokered deposits. While the breakout of maturities of these deposits is not known exactly, a simple averaging would have put the threat of brokered deposits loss to IndyMac at $500 million a month, had the regulator disallowed IndyMac from acquiring new brokered deposits on June 30.
When home prices declined in the latter half of 2007 and the secondary mortgage market collapsed, IndyMac was forced to hold $10.7 billion of loans it could not sell in the secondary market. Its reduced liquidity was further exacerbated in late June 2008 when account holders withdrew $1.55 billion or about 7.5% of IndyMac's deposits. This “run” on the thrift followed the public release of a letter from Senator Charles Schumer to the FDIC and OTS. The letter outlined the Senator’s concerns with IndyMac. While the run was a contributing factor in the timing of IndyMac’s demise, the underlying cause of the failure was the unsafe and unsound manner in which the thrift was operated.
On July 11, 2008, citing liquidity concerns, the FDIC put IndyMac Bank into conservatorship. A bridge bank, IndyMac Federal Bank, FSB, was established to assume control of IndyMac Bank's assets, its secured liabilities, and its insured deposit accounts. The FDIC announced plans to open IndyMac Federal Bank, FSB on July 14, 2008. Until then, depositors would have access their insured deposits through ATMs, their existing checks, and their existing debit cards. Telephone and Internet account access was restored when the bank reopened. The FDIC guarantees the funds of all insured accounts up to US$100,000, and has declared a special advance dividend to the roughly 10,000 depositors with funds in excess of the insured amount, guaranteeing 50% of any amounts in excess of $100,000. Yet, even with the pending sale of Indymac to IMB Management Holdings, an estimated 10,000 uninsured depositors of Indymac are still at a loss of over $270 million.
Initially the companies affected were those directly involved in home construction and mortgage lending such as Northern Rock and Countrywide Financial, as they could no longer obtain financing through the credit markets. Over 100 mortgage lenders went bankrupt during 2007 and 2008. Concerns that investment bank Bear Stearns would collapse in March 2008 resulted in its fire-sale to JP Morgan Chase. The financial institution crisis hit its peak in September and October 2008. Several major institutions either failed, were acquired under duress, or were subject to government takeover. These included Lehman Brothers, Merrill Lynch, Fannie Mae, Freddie Mac, Washington Mutual, Wachovia, Citigroup, and AIG. On Oct. 6, 2008, three weeks after Lehman Brothers filed the largest bankruptcy in U.S. history, Lehman's former CEO found himself before Representative Henry A. Waxman, the California Democrat who chaired the House Committee on Oversight and Government Reform. Fuld said he was a victim of the collapse, blaming a "crisis of confidence" in the markets for dooming his firm.
In September 2008, the crisis hit its most critical stage. There was the equivalent of a bank run on the money market funds, which frequently invest in commercial paper issued by corporations to fund their operations and payrolls. Withdrawal from money markets were $144.5 billion during one week, versus $7.1 billion the week prior. This interrupted the ability of corporations to rollover (replace) their short-term debt. The U.S. government responded by extending insurance for money market accounts analogous to bank deposit insurance via a temporary guarantee and with Federal Reserve programs to purchase commercial paper. The TED spread, an indicator of perceived credit risk in the general economy, spiked up in July 2007, remained volatile for a year, then spiked even higher in September 2008, reaching a record 4.65% on October 10, 2008.
Economist Paul Krugman and U.S. Treasury Secretary Timothy Geithner explain the credit crisis via the implosion of the shadow banking system, which had grown to nearly equal the importance of the traditional commercial banking sector as described above. Without the ability to obtain investor funds in exchange for most types of mortgage-backed securities or asset-backed commercial paper, investment banks and other entities in the shadow banking system could not provide funds to mortgage firms and other corporations.
This meant that nearly one-third of the U.S. lending mechanism was frozen and continued to be frozen into June 2009. According to the Brookings Institution, the traditional banking system does not have the capital to close this gap as of June 2009: "It would take a number of years of strong profits to generate sufficient capital to support that additional lending volume". The authors also indicate that some forms of securitization are "likely to vanish forever, having been an artifact of excessively loose credit conditions". While traditional banks have raised their lending standards, it was the collapse of the shadow banking system that is the primary cause of the reduction in funds available for borrowing.
There is a direct relationship between declines in wealth and declines in consumption and business investment, which along with government spending, represent the economic engine. Between June 2007 and November 2008, Americans lost an estimated average of more than a quarter of their collective net worth.[citation needed] By early November 2008, a broad U.S. stock index the S&P 500, was down 45% from its 2007 high. Housing prices had dropped 20% from their 2006 peak, with futures markets signaling a 30–35% potential drop. Total home equity in the United States, which was valued at $13 trillion at its peak in 2006, had dropped to $8.8 trillion by mid-2008 and was still falling in late 2008. Total retirement assets, Americans' second-largest household asset, dropped by 22%, from $10.3 trillion in 2006 to $8 trillion in mid-2008. During the same period, savings and investment assets (apart from retirement savings) lost $1.2 trillion and pension assets lost $1.3 trillion. Taken together, these losses total a staggering $8.3 trillion. Since peaking in the second quarter of 2007, household wealth is down $14 trillion.
In November 2008, economist Dean Baker observed: "There is a really good reason for tighter credit. Tens of millions of homeowners who had substantial equity in their homes two years ago have little or nothing today. Businesses are facing the worst downturn since the Great Depression. This matters for credit decisions. A homeowner with equity in her home is very unlikely to default on a car loan or credit card debt. They will draw on this equity rather than lose their car and/or have a default placed on their credit record. On the other hand, a homeowner who has no equity is a serious default risk. In the case of businesses, their creditworthiness depends on their future profits. Profit prospects look much worse in November 2008 than they did in November 2007... While many banks are obviously at the brink, consumers and businesses would be facing a much harder time getting credit right now even if the financial system were rock solid. The problem with the economy is the loss of close to $6 trillion in housing wealth and an even larger amount of stock wealth.
Several commentators have suggested that if the liquidity crisis continues, an extended recession or worse could occur. The continuing development of the crisis has prompted fears of a global economic collapse although there are now many cautiously optimistic forecasters in addition to some prominent sources who remain negative. The financial crisis is likely to yield the biggest banking shakeout since the savings-and-loan meltdown. Investment bank UBS stated on October 6 that 2008 would see a clear global recession, with recovery unlikely for at least two years. Three days later UBS economists announced that the "beginning of the end" of the crisis had begun, with the world starting to make the necessary actions to fix the crisis: capital injection by governments; injection made systemically; interest rate cuts to help borrowers. The United Kingdom had started systemic injection, and the world's central banks were now cutting interest rates. UBS emphasized the United States needed to implement systemic injection. UBS further emphasized that this fixes only the financial crisis, but that in economic terms "the worst is still to come". UBS quantified their expected recession durations on October 16: the Eurozone's would last two quarters, the United States' would last three quarters, and the United Kingdom's would last four quarters. The economic crisis in Iceland involved all three of the country's major banks. Relative to the size of its economy, Iceland’s banking collapse is the largest suffered by any country in economic history.
The Brookings Institution reported in June 2009 that U.S. consumption accounted for more than a third of the growth in global consumption between 2000 and 2007. "The US economy has been spending too much and borrowing too much for years and the rest of the world depended on the U.S. consumer as a source of global demand." With a recession in the U.S. and the increased savings rate of U.S. consumers, declines in growth elsewhere have been dramatic. For the first quarter of 2009, the annualized rate of decline in GDP was 14.4% in Germany, 15.2% in Japan, 7.4% in the UK, 18% in Latvia, 9.8% in the Euro area and 21.5% for Mexico.
Some developing countries that had seen strong economic growth saw significant slowdowns. For example, growth forecasts in Cambodia show a fall from more than 10% in 2007 to close to zero in 2009, and Kenya may achieve only 3–4% growth in 2009, down from 7% in 2007. According to the research by the Overseas Development Institute, reductions in growth can be attributed to falls in trade, commodity prices, investment and remittances sent from migrant workers (which reached a record $251 billion in 2007, but have fallen in many countries since). This has stark implications and has led to a dramatic rise in the number of households living below the poverty line, be it 300,000 in Bangladesh or 230,000 in Ghana. Especially states with a fragile political system have to fear that investors from Western states withdraw their money because of the crisis. Bruno Wenn of the German DEG recommends to provide a sound economic policymaking and good governance to attract new investors
The World Bank reported in February 2009 that the Arab World was far less severely affected by the credit crunch. With generally good balance of payments positions coming into the crisis or with alternative sources of financing for their large current account deficits, such as remittances, Foreign Direct Investment (FDI) or foreign aid, Arab countries were able to avoid going to the market in the latter part of 2008. This group is in the best position to absorb the economic shocks. They entered the crisis in exceptionally strong positions. This gives them a significant cushion against the global downturn. The greatest impact of the global economic crisis will come in the form of lower oil prices, which remains the single most important determinant of economic performance. Steadily declining oil prices would force them to draw down reserves and cut down on investments. Significantly lower oil prices could cause a reversal of economic performance as has been the case in past oil shocks. Initial impact will be seen on public finances and employment for foreign workers.
The output of goods and services produced by labor and property located in the United States—decreased at an annual rate of approximately 6% in the fourth quarter of 2008 and first quarter of 2009, versus activity in the year-ago periods. The U.S. unemployment rate increased to 10.1% by October 2009, the highest rate since 1983 and roughly twice the pre-crisis rate. The average hours per work week declined to 33, the lowest level since the government began collecting the data in 1964. With the decline of gross domestic product came the decline in innovation. With fewer resources to risk in creative destruction, the number of patent applications flat-lined. Compared to the previous 5 years of exponential increases in patent application, this stagnation correlates to the similar drop in GDP during the same time period.
European regulators introduced Basel III regulations for banks. It increased capital ratios, limits on leverage, narrow definition of capital (to exclude subordinated debt), limit counter-party risk, and new liquidity requirements. Critics argue that Basel III doesn’t address the problem of faulty risk-weightings. Major banks suffered losses from AAA-rated created by financial engineering (which creates apparently risk-free assets out of high risk collateral) that required less capital according to Basel II. Lending to AA-rated sovereigns has a risk-weight of zero, thus increasing lending to governments and leading to the next crisis. Johan Norberg argues that regulations (Basel III among others) have indeed led to excessive lending to risky governments (see European sovereign-debt crisis) and the ECB pursues even more lending as the solution.
The U.S. recession that began in December 2007 ended in June 2009, according to the U.S. National Bureau of Economic Research (NBER) and the financial crisis appears to have ended about the same time. In April 2009 TIME magazine declared "More Quickly Than It Began, The Banking Crisis Is Over." The United States Financial Crisis Inquiry Commission dates the crisis to 2008. President Barack Obama declared on January 27, 2010, "the markets are now stabilized, and we've recovered most of the money we spent on the banks."
Advanced economies led global economic growth prior to the financial crisis with "emerging" and "developing" economies lagging behind. The crisis completely overturned this relationship. The International Monetary Fund found that "advanced" economies accounted for only 31% of global GDP while emerging and developing economies accounted for 69% of global GDP from 2007 to 2014. In the tables, the names of emergent economies are shown in boldface type, while the names of developed economies are in Roman (regular) type.
Krugman's contention (that the growth of a commercial real estate bubble indicates that U.S. housing policy was not the cause of the crisis) is challenged by additional analysis. After researching the default of commercial loans during the financial crisis, Xudong An and Anthony B. Sanders reported (in December 2010): "We find limited evidence that substantial deterioration in CMBS [commercial mortgage-backed securities] loan underwriting occurred prior to the crisis." Other analysts support the contention that the crisis in commercial real estate and related lending took place after the crisis in residential real estate. Business journalist Kimberly Amadeo reports: "The first signs of decline in residential real estate occurred in 2006. Three years later, commercial real estate started feeling the effects. Denice A. Gierach, a real estate attorney and CPA, wrote:
In a Peabody Award winning program, NPR correspondents argued that a "Giant Pool of Money" (represented by $70 trillion in worldwide fixed income investments) sought higher yields than those offered by U.S. Treasury bonds early in the decade. This pool of money had roughly doubled in size from 2000 to 2007, yet the supply of relatively safe, income generating investments had not grown as fast. Investment banks on Wall Street answered this demand with products such as the mortgage-backed security and the collateralized debt obligation that were assigned safe ratings by the credit rating agencies.
The collateralized debt obligation in particular enabled financial institutions to obtain investor funds to finance subprime and other lending, extending or increasing the housing bubble and generating large fees. This essentially places cash payments from multiple mortgages or other debt obligations into a single pool from which specific securities draw in a specific sequence of priority. Those securities first in line received investment-grade ratings from rating agencies. Securities with lower priority had lower credit ratings but theoretically a higher rate of return on the amount invested.
By September 2008, average U.S. housing prices had declined by over 20% from their mid-2006 peak. As prices declined, borrowers with adjustable-rate mortgages could not refinance to avoid the higher payments associated with rising interest rates and began to default. During 2007, lenders began foreclosure proceedings on nearly 1.3 million properties, a 79% increase over 2006. This increased to 2.3 million in 2008, an 81% increase vs. 2007. By August 2008, 9.2% of all U.S. mortgages outstanding were either delinquent or in foreclosure. By September 2009, this had risen to 14.4%.
Lower interest rates encouraged borrowing. From 2000 to 2003, the Federal Reserve lowered the federal funds rate target from 6.5% to 1.0%. This was done to soften the effects of the collapse of the dot-com bubble and the September 2001 terrorist attacks, as well as to combat a perceived risk of deflation. As early as 2002 it was apparent that credit was fueling housing instead of business investment as some economists went so far as to advocate that the Fed "needs to create a housing bubble to replace the Nasdaq bubble". Moreover, empirical studies using data from advanced countries show that excessive credit growth contributed greatly to the severity of the crisis.
Bernanke explained that between 1996 and 2004, the U.S. current account deficit increased by $650 billion, from 1.5% to 5.8% of GDP. Financing these deficits required the country to borrow large sums from abroad, much of it from countries running trade surpluses. These were mainly the emerging economies in Asia and oil-exporting nations. The balance of payments identity requires that a country (such as the U.S.) running a current account deficit also have a capital account (investment) surplus of the same amount. Hence large and growing amounts of foreign funds (capital) flowed into the U.S. to finance its imports.
The Fed then raised the Fed funds rate significantly between July 2004 and July 2006. This contributed to an increase in 1-year and 5-year adjustable-rate mortgage (ARM) rates, making ARM interest rate resets more expensive for homeowners. This may have also contributed to the deflating of the housing bubble, as asset prices generally move inversely to interest rates, and it became riskier to speculate in housing. U.S. housing and financial assets dramatically declined in value after the housing bubble burst.
Testimony given to the Financial Crisis Inquiry Commission by Richard M. Bowen III on events during his tenure as the Business Chief Underwriter for Correspondent Lending in the Consumer Lending Group for Citigroup (where he was responsible for over 220 professional underwriters) suggests that by the final years of the U.S. housing bubble (2006–2007), the collapse of mortgage underwriting standards was endemic. His testimony stated that by 2006, 60% of mortgages purchased by Citi from some 1,600 mortgage companies were "defective" (were not underwritten to policy, or did not contain all policy-required documents) – this, despite the fact that each of these 1,600 originators was contractually responsible (certified via representations and warrantees) that its mortgage originations met Citi's standards. Moreover, during 2007, "defective mortgages (from mortgage originators contractually bound to perform underwriting to Citi's standards) increased... to over 80% of production".
In separate testimony to Financial Crisis Inquiry Commission, officers of Clayton Holdings—the largest residential loan due diligence and securitization surveillance company in the United States and Europe—testified that Clayton's review of over 900,000 mortgages issued from January 2006 to June 2007 revealed that scarcely 54% of the loans met their originators’ underwriting standards. The analysis (conducted on behalf of 23 investment and commercial banks, including 7 "too big to fail" banks) additionally showed that 28% of the sampled loans did not meet the minimal standards of any issuer. Clayton's analysis further showed that 39% of these loans (i.e. those not meeting any issuer's minimal underwriting standards) were subsequently securitized and sold to investors.

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