Processes of organizational and societal change are complex. This can be demonstrated quite easily by considering the development of the Western economic recession, which provides lessons of how change processes can impact organizational behaviour. We shall take a little time to explore this.

The Case in Hand

In 2008 and 2009 the world economy experienced its worst ever financial crisis, the apparent onset of which came in 2007, and was triggered by the relaxation of the constraints on its financial institutions and their responsibility in managing debt. The major impact came initially in the United States through the development of unsecured lending that led in due course to the collapse in the sub-prime market (composed of people with questionable credit ratings who sought to secure home loans), resulting in uncountable corporate failures and financial disasters. A consequence has been the deepest recession since the 1930s (Dolphin & Nash, 2011).

The crisis resulted from a combination of complex factors that drew on the relationship between smaller-scale microeconomics and larger-scale macroeconomics (Dopfer, Foster & Potts; 2004; Goldspink & Kay, 2004; Gibson, 2008). The problematic microeconomic factors included high-risk lending by financial institutions, regulatory failures, inflated credit ratings, and high-risk and poor quality financial products designed and sold by some investment banks (Lavin & Coburn, 2011).

The crisis was aggravated by its shadow banking system, which embraces unregulated financial activities, because since it operates through rational expectation during stability it is welfare improving, but otherwise is vulnerable to crises and liquidity dry-ups when investors ignore risks (Crotty & Epstein, 2008; Gennaioli, Shleifer & Vishny, 2013; Sanches, 2014). Despite this, it is attractive to the individualists of this world who led policy formulation. As a result, US policy deregulated the provision of credit during the period 2002–2008, allowing high-risk lending and borrowing practices. Substantial changes were made to the banking industry that resulted in the relaxation of the rules under which banks operated, and the encouragement of risk-taking. In the United States in 1994 a novel relaxation was created by Congress to explicitly authorize interstate banking, permitting federally chartered banks to open branches nationwide more easily than before. Perhaps relatively harmless on its own, in addition more deregulation occurred in 1999 with the repeal of the Glass-Steagall Act of 1933.