The more you ponder on the financial crisis, that was precipitated by the "sub-prime" loans and exposed all sorts of high risk investments, the more you question the rational behind it all. As huge bailout packages are being presented by governments worldwide, the essential lesson that we learn is a very interesting one.
When the economy is booming all the benefits remain private, but when there is a crash the errors are collective and the loses are socialized. Please shed some light on this and debate this new private-public paradigm.
9 comments:
A thing about economy is, we are all linked together anyway. The benefits may go to the private sector immediately, but the benefits received are coming from a economically secure consumer base, or a happy working class. We go up and down together. These large industries and the private corporations within, are in a way, the framework for our whole economy as an institution. The proprietors who watch over these institutions in a state of perpetual greed are kept happy, even in times of crisis. With out them, we as a people know we will suffer. We may fear socialism or our government having too much control over the economy; or we may fear the loss of the capitalist system, which has given us such a good standard of living. Either way, we know that these corporations, and the elite that run them are necessary to our current standard of living in the USA. For this reason(whether or not its reality), we suffer collectively by bailing out the private industries for fear of what might happen if we loose our current capitalist frame work. We do what we can to restore the private benefits because we know that our standard of living depends on it.
The fact that we are all negatively impacted, regardless of our social class, by economic crisis in our country is precisely why we all desire an economically sound and stable economy. Preventing negative consequences of a failing economy from reaching our own lives is reason enough to support capitalism and an economy that is successfully guided by corporations. Even if all people are not directly benefited or profiting from a booming economy, the trickle down effects are still present by at least preventing the people from having to concern themselves with greater issues regarding the national economy at all. It is not the profit then that reaches the whole economy, but the prevention of a devaluation in their personally earned money, or the absence of a responsibility to rebuild a fallen economy, like people are experiencing now. It benefits the entire country when the economy is run soundly, and makes life more comfortable for everyone even if the profits of the big corporations aren't being evenly dispersed throughout society.
I find it really interesting that the dollar has actually got stronger against the euro and the pound in the last month, and am wondering what the real explanation is behind this, and how the rest of the world reacts to this. It seems like other countries would be angry that the U.S. really caused this financial crisis due to fiscal irresponsibility, and the crisis has had ripple effects throughout the entire world, but still U.S. currency is gaining strength compared to other strong nations.
What an interesting contrast - - during a booming economy, benefits are private, but during the downward slope of the cycle (as we know the economy moves in cycles), losses are collective. I think Meghan brings up a great point - - that even though the benefits of a booming economy aren´t necessarily evenly dispersed, they do, in an indirect way, affect everyone because of the trickle-down affect and also because, like meghan said, a booming economy is inherently the absence of a struggling economy.
On another note, I think this type of conclusion (befefits are private, losses are collective) is difficult to make because of course people are going to want to be less affected by negative things and more affected by positive things. So this idea, while it definitely has truth to it, could also be compounded by our own desire in wanting more of the benefits and less of the losses.
And on another note, I think this idea that losses are collective applies to many other aspects of society and also affirms the idea of globalization. We are all affected by the bad economy. We are all affected by enviornmental problems. We are all affected by the health care system. This list goes on and on...
There is one simple solution to the whole problem: total and complete removal and disconnection from the government and the economic sector. The fact that the government has gotten itself involved has become an issue for everyone; if people don’t want to pay the price for the mistakes that others have made, then the only thing they can do is ask for the government not to get involved. That is the essence of capitalism: the free movement of products and services in a way that is appropriated by the market. If the huge banks and investment companies’ bit off problems too big for themselves, they should have to pay the price; when the government bails out companies like this, it allows people to take advantage of the system and absolve themselves from their faults. Since the people of the US have opted (with the October bailout plan) for a system in which the government bails out its citizens and economy, people shouldn’t complain about the system.
I don’t understand why this is even a question….why would the private sectors ask for help when they are reaping all the benefits? Of course they are going to turn to the government when they realized that they are fucked. Of course the nation-state is going to help out, we agreed in class that help in time of a crisis is apart of the nation-states duty and a reason of why we keep nation-states around. Of course it is not fair that the wealthy of our nation are experiencing minimal consequences for what they did, but they only way they would not, would to do what Will has suggested. So you have to just take the good with the bad.
This is definitely an interesting issue that would be interesting to look deeper into...
To some extent I think that we DO reap the benefits of a booming economy though. Many assume that if there aren't extra bonuses thrown to us, we aren't being allotted our share of the good times. However I don't think bonuses/extra benefits are necessarily what everyone should get. I think living in a stable time and having your basic necessities/luxuries available to you is the benefit. If everyone were to be given benefits from the booming economy, how long with that economy really "boom"?
Obviously there is a limit to where it becomes unacceptable/unfair for the private sectors to be abusing the benefits, but as Grey mentioned to some extend our society has to follow these private sectors because we rely on their success for ours. If we want that to change, then yes, we could pull completely apart as Will mentioned, I just don't see that happening the way our society and government has been built up.
We've talked in class about how this economic crisis could mean the end of free market capitalism as we have known it. I think that all of these comments shows that there will definitely be a change in the future of free market capitalism in America because the large corporations obviously cannot have free range of the market efficiently, but will the change actually be permanent? In response to Will's comment, it is obvious that the government cannot be separated from the economy completely because if the government did not intervene in this economic crash the country would hit a depression worse than it experienced in the 1920s. Clearly, for the good of the country as a whole, and for each individual in the country (whether they realize it and appreciate it or not), the government had to intervene in this instance. However, the government took a more direct role in the economy to get the country out of the Great Depression with the New Deal also, and here we are not a century later and before this economic crash, free market capitalism had retained its full force in America. I think it is important that the structure of our government allows it to intervene in the economy in economic emergencies, but I think it is too soon to mourn the loss of free market capitalism, it is a cornerstone of America and after the economy recovers I think that most economic restrictions will be lifted.
When the economy is booming, of course everything is going to be privatized because the majority of the people in society are reaping the benefits one way or another. No one at the time wants or needs government interference. However, when the economy is in a recession the majority of the society feels its affects and needs help via the government. The government must step into help insure that we do not fall into another depression that would be worst than the depression that took place in the 1930s. No government interference would mean extreme unemployment that would affect not only this country but countries around the world thanks to globalization. Once the recession has been lifted, I believe that the government once again will step out and let the market be privatized once again.
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