Rousedruminations
25th March 2011, 03:27
An essay question for international relations that i typed up and gave in, recently.
Opinions/thoughts...
The Global Financial Crisis demonstrates that “free market capitalism” is an ideological weapon wielded by wealthy elites in Western countries to preserve their privileged lifestyles ?
The free economic market, where by the exchange and selling, of goods and services continues without ‘proper’ legal and governmental regulation in the world today has in essence perpetuated the malaise of global capitalism, its main disadvantage being the disparity between the rich and the poor. Thus, Karl Marx has analysed the antagonism between classes and that instead, of the classes and markets working harmoniously together, as the free market thought propagates (Adam Smith), he states, that the direct opposite occurs. He suggests that Capitalism will inevitably undergo, convulsions of financial instability, the experience and incident inescapable by the system itself and the people consumed by it, as noted already by the great depression in the late 1920’s and more recently in 2008. Since the emergence of globalization, the interdependence of countries across the world has significantly increased, implicitly showing that a financial downturn in the US affects the many others in the world economy. The causes of such crises are greed and manipulation by the wealthy elite who want more of a privileged style at the expense of the common good, the working class.
After World War II and the Great Financial Depression in the 1930’s the planning of a new economic order commenced. In 1944, policy-makers gathered at ‘Bretton Woods’ USA, to consider how to resolve a very serious economic problem. First they needed to ensure that the Great Depression never would happen again. So the appropriate representatives of each country found ways to ensure a stable monetary system. Second they needed to rebuild war-torn Europe. At Bretton Woods three institutions were founded, the International Monetary Fund (IMF), International Bank for Reconstruction and Development (IBRD- later the World Bank) and GATT (General Agreement on Tariffs and Trade). In essence these globalized financial institutions would stabilize the economy by providing money to countries in urgent need, during times of great economic instability and downturn.
In 2008 a global financial meltdown began, the crash of Lehman Brothers and AIG (American International Group) exposed the degree to which some banks had excessively leveraged themselves into highly profitable schemes while also being dizzyingly risky. Governments all over the world who were apart of the capitalistic system had to intervene in private enterprises (banks) and bail them out. Many countries relied on the IMF (International Monetary Fund) for assistance; others permitted their banks to earn massive profits at the expense of society, the working class, who ended up paying the costs of those risks decided by the wealthy elite. Poorly designed incentives such as pay bonuses assisted the unnecessary risk taking adventure those were willing to take, when the market is completely free. Thus during this period, the advantages of Globalization and capitalism for those countries, who mostly benefit from it and those that were harshly affected by financial liberation was revisited. The GFC in 2008 also exposed failures in corporate governance and the regulation of credit-rating agencies. Most of all, the financial crisis exposed the covert guarantee that governments gave big private enterprises- that they were ‘too big’ to fail.
Since the undertaking of risky adventure’s used by private financial institutions was the main cause of the GFC, in less developed countries the crises would instigate urgent tasks of financial stability provided by the World Bank and the IMF as indicated by the recent bailout of Greece where the EU had approved of a 80 billion Euro loan, the further assistance coming from the IMF. The full extent of the GFC was only known later, when governments across Europe (Ukraine) used austerity measures on the population to resurrect the economy of the country with the help of the two main institutions of the three as explained above, the IMF and the World Bank.
In terms of the Marxist traditional view, a class struggle occurs between the oppressors and the oppressed. The oppressors are the capitalist, who own the ‘means of production’ (trade & Industry) and the oppressed are the working class. In accordance to international relations, the meaning of class relations in this context is the unequal relationship between the core (The USA, Western Countries or industrialized countries) and the periphery (developing countries, Latin America). Poverty and destitution in so many countries describes how the global capitalistic order can profoundly affect a smaller and developing nation in the world. After all the disparity between the periphery and the core is a reflection of those who own the means of production (owners of private financial institutions).
In relation to the Marxist view, we can now further explain the events of the GFC. ‘Free Market Capitalism’, entirely unregulated by no authority other than itself would be the ideological weapon used by those countries in the core. The core is defined as industrialized nations, democratic governments who have high wages, export manufactured products, import raw materials, have high investments and welfare services. The free market is used by capitalist to take risky measures by achieving high profit margins as seen by the bailout of Lehman brothers and AIG. Since the world is already globalized in terms of the communication, infrastructure and economy of the world the interdependence of those in the CORE affects other nations in it as well like Germany and Greece both using austerity measures and the assistance of the world bank and IMF to assist them through to the road of economic stability .
On the contrary there are other competing ideologies other than the Marxist view to the IPE (International Political Economy) which include the liberal and mercantilist tradition. The liberal tradition states that the free voluntary exchange in markets is both efficient and morally desirable. Freely exchangeable currencies, open markets and creating a global system of prices ensures an equitable distribution of goods and services among everyone. According to the mercantilist view, the international political economy is a competitive stage in which countries, rival each other to assume more power economically and militarily, a view that each nation exists independently to survive on its own. As can be seen, both theories can be emphatically rejected. The liberal (free) market and the mercantile one has created two major financial collapses one in the late 1920’s til the late 1930’s and the other in 2008. The inequality between the oppressed (working class/poor) and the oppressors (wealthy elite) was explicitly evident in both circumstances. Therefore it can be safely argued that, the Global Financial Crisis demonstrates that “free market capitalism” is an ideological weapon wielded by wealthy elites in Western countries to preserve their privileged lifestyles.
Opinions/thoughts...
The Global Financial Crisis demonstrates that “free market capitalism” is an ideological weapon wielded by wealthy elites in Western countries to preserve their privileged lifestyles ?
The free economic market, where by the exchange and selling, of goods and services continues without ‘proper’ legal and governmental regulation in the world today has in essence perpetuated the malaise of global capitalism, its main disadvantage being the disparity between the rich and the poor. Thus, Karl Marx has analysed the antagonism between classes and that instead, of the classes and markets working harmoniously together, as the free market thought propagates (Adam Smith), he states, that the direct opposite occurs. He suggests that Capitalism will inevitably undergo, convulsions of financial instability, the experience and incident inescapable by the system itself and the people consumed by it, as noted already by the great depression in the late 1920’s and more recently in 2008. Since the emergence of globalization, the interdependence of countries across the world has significantly increased, implicitly showing that a financial downturn in the US affects the many others in the world economy. The causes of such crises are greed and manipulation by the wealthy elite who want more of a privileged style at the expense of the common good, the working class.
After World War II and the Great Financial Depression in the 1930’s the planning of a new economic order commenced. In 1944, policy-makers gathered at ‘Bretton Woods’ USA, to consider how to resolve a very serious economic problem. First they needed to ensure that the Great Depression never would happen again. So the appropriate representatives of each country found ways to ensure a stable monetary system. Second they needed to rebuild war-torn Europe. At Bretton Woods three institutions were founded, the International Monetary Fund (IMF), International Bank for Reconstruction and Development (IBRD- later the World Bank) and GATT (General Agreement on Tariffs and Trade). In essence these globalized financial institutions would stabilize the economy by providing money to countries in urgent need, during times of great economic instability and downturn.
In 2008 a global financial meltdown began, the crash of Lehman Brothers and AIG (American International Group) exposed the degree to which some banks had excessively leveraged themselves into highly profitable schemes while also being dizzyingly risky. Governments all over the world who were apart of the capitalistic system had to intervene in private enterprises (banks) and bail them out. Many countries relied on the IMF (International Monetary Fund) for assistance; others permitted their banks to earn massive profits at the expense of society, the working class, who ended up paying the costs of those risks decided by the wealthy elite. Poorly designed incentives such as pay bonuses assisted the unnecessary risk taking adventure those were willing to take, when the market is completely free. Thus during this period, the advantages of Globalization and capitalism for those countries, who mostly benefit from it and those that were harshly affected by financial liberation was revisited. The GFC in 2008 also exposed failures in corporate governance and the regulation of credit-rating agencies. Most of all, the financial crisis exposed the covert guarantee that governments gave big private enterprises- that they were ‘too big’ to fail.
Since the undertaking of risky adventure’s used by private financial institutions was the main cause of the GFC, in less developed countries the crises would instigate urgent tasks of financial stability provided by the World Bank and the IMF as indicated by the recent bailout of Greece where the EU had approved of a 80 billion Euro loan, the further assistance coming from the IMF. The full extent of the GFC was only known later, when governments across Europe (Ukraine) used austerity measures on the population to resurrect the economy of the country with the help of the two main institutions of the three as explained above, the IMF and the World Bank.
In terms of the Marxist traditional view, a class struggle occurs between the oppressors and the oppressed. The oppressors are the capitalist, who own the ‘means of production’ (trade & Industry) and the oppressed are the working class. In accordance to international relations, the meaning of class relations in this context is the unequal relationship between the core (The USA, Western Countries or industrialized countries) and the periphery (developing countries, Latin America). Poverty and destitution in so many countries describes how the global capitalistic order can profoundly affect a smaller and developing nation in the world. After all the disparity between the periphery and the core is a reflection of those who own the means of production (owners of private financial institutions).
In relation to the Marxist view, we can now further explain the events of the GFC. ‘Free Market Capitalism’, entirely unregulated by no authority other than itself would be the ideological weapon used by those countries in the core. The core is defined as industrialized nations, democratic governments who have high wages, export manufactured products, import raw materials, have high investments and welfare services. The free market is used by capitalist to take risky measures by achieving high profit margins as seen by the bailout of Lehman brothers and AIG. Since the world is already globalized in terms of the communication, infrastructure and economy of the world the interdependence of those in the CORE affects other nations in it as well like Germany and Greece both using austerity measures and the assistance of the world bank and IMF to assist them through to the road of economic stability .
On the contrary there are other competing ideologies other than the Marxist view to the IPE (International Political Economy) which include the liberal and mercantilist tradition. The liberal tradition states that the free voluntary exchange in markets is both efficient and morally desirable. Freely exchangeable currencies, open markets and creating a global system of prices ensures an equitable distribution of goods and services among everyone. According to the mercantilist view, the international political economy is a competitive stage in which countries, rival each other to assume more power economically and militarily, a view that each nation exists independently to survive on its own. As can be seen, both theories can be emphatically rejected. The liberal (free) market and the mercantile one has created two major financial collapses one in the late 1920’s til the late 1930’s and the other in 2008. The inequality between the oppressed (working class/poor) and the oppressors (wealthy elite) was explicitly evident in both circumstances. Therefore it can be safely argued that, the Global Financial Crisis demonstrates that “free market capitalism” is an ideological weapon wielded by wealthy elites in Western countries to preserve their privileged lifestyles.