THE GLOBAL CREDIT CRUNCH AND THE CRISIS OF CAPITALISM pdf

The global credit crunch and the crisis of capitalism

THE GLOBAL CREDIT CRUNCH AND THE CRISIS OF CAPITALISM

Introduction

Capitalism  (economic  Liberalism)  has  been  credited  for  generating  wealth  that  has  been  unprecedented  in  history.  For  many  historians  the  struggle  between  Capitalism  and Communism  for  global  supremacy  was  settled  through  the  ability  of  Capitalism  to  generate  vast amounts of wealth and prosperity for its people. The battle between the two ideologies resulted in free markets, free trade, financial markets and the removal of state intervention in the  economy  becoming  prerequisites  for  21st  century  economies.    Proponents  of  Capitalism  continue to hold the development of South East Asia especially Japan as well as Germany were a direct result of the adoption of Capitalism.

The Third world has also not been spared, Indonesia, Pakistan, South America, Africa as well as the Middle East were all sold the idea of free markets, and all of these regions and nations now  have  Western  style  financial  markets  where  large  sums  of  wealth  are  the  subject  of  speculation on the state of the economy and future revenue flows.

Malaysia was the first of the Muslim world to set up Western style financial markets which attracted  many  Western  companies,  hedge  funds  and  even  George  Soro’s  (world  renowned  speculator).  Pakistan’s  KSE  100  Index  was  the  best‐performing  stock  market  index  in  the world  as  declared  by  the  international  magazine  “Business  Week”  in  20041  It  is  currently  valued more then $30 billion. The remainder of the Muslim world also have financial markets, with the Gulf States having the largest. However only those aligned to the rulers or from their families have benefited from the financial markets.

Although the Western world led by the US continue to sell Capitalism and its adoption as the only  way  for  progress  Capitalism  has  come  to  be  characterised  with  the  regular  boom  and  bust,  recession  and  even  economic  collapse.  The  1997  Asian  financial  crisis  has  been attributed to liberal style financial markets, speculation and many nations such as Indonesia and Thailand a decade later have been unable to recover from the crisis.

The world is once again in the midst of a global crisis which began with the financial crisis, that  engulfed the world. The ‘Credit crunch’ as it has come to be known brought panic and turmoil  in  the  summer  of  2007  to  the  world’s  financial  markets  causing  the  US  housing  market  bubble  to  burst.  The  crisis  threatens  a  worldwide  economic  recession,  potentially bringing to a halt more than a decade of increasing prosperity and employment for Western economies  and  potentially  wiping  a  staggering  $1  trillion  off  of  the  value  of  the  world  economy.2

Many  experts  have  commented  on  individual  factors  that  caused  the  crisis,  once  again  steering  well  clear  of  blaming  Capitalism.  As  each  month  commenced  from  the  summer  of 2007 more and more information become clear about the extent of the problem. The collapse of  Northern  Rock,  the  5th  largest  bank  in  the  UK,  the  bankruptcies  of  nearly  all  of  the  Sub‐