The global credit crunch and the crisis of capitalism
THE GLOBAL CREDIT CRUNCH AND THE CRISIS OF CAPITALISM
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‐