Monday, March 2, 2009

Capitalism and the Financial Crisis


Posted By: Yi-Xin Jin (Lily)


After witnessing a string of unprecedented turmoil, concerned market participants are encouraging policy makers to take action in improving the transparency and supervision of the financial system. In response to the crisis of confidence among investors, central banks around the world has announced a series of actions that will provide more liquidity and effective set of instruments to stabilize conditions in both strained markets and troubled institutions. Most economically developed countries haven’t seen a crisis like this since the great depression. However, today’s crisis is nothing new but a inherent result of the captialist system. Josh Lees, a writer for Socialist Magazine writes in his article “Understanding Marxism: why capitalism is a system of crisis” that “Economic crisis is a recurring feature of capitalism. Every economic boom ends in a slump, every "golden age" crumbles into recession.” Even though, capitalism has brought wealth and opportunities for many but in the past the system has also created periods of crisis. Many economists believe that there’s no long term detriment from our current crisis; instead there can be an opportunity for change in our financial markets.

Capitalism has become a popular subject in the news media since the start of financial crisis. Many people “blame the excesses of capitalism for the current financial crisis.” There are also articles that is pro-capitalism, like the article posted by TimesOnline, which states that “the financial crisis has exposed capitalism's darkest imperfections. But it is still the best hope we have of creating wealth and opportunity for the many”. There has been a continuous debate regarding whether economic liberty is beneficial or harmful to our economy. In the past two centuries, capitalism has proved itself to be an incredibly resilient and adaptable system. “From the evolution of the stock market and the corporation to nationalisation and the welfare state, to more recent deregulation, capitalism has seemed to evolve remarkably successfully over time.” Histroically, it was with the help of political intervention that allowed capitalism to adapt efficiently to the changing circumstances and crisis which implies that capitalism is not capable of turning our economy around all by itself. The calamity in our current banking system has brought more government intervention into our financial system since the Great Depression. Even though, this is moving our economy another step away from ecnomic liberty but this is the only way to save our unstable financial markets and help the general public in the long run.


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