It has been a disastrous month for the global economy, front runners of the capitalist system Lehman Brothers and Merrill Lynch collapsed. On top of that, the US government has also bailed out mortgage giants Fannie Mae and Freddie Mac while the fall of Northen Rock was cushioned by the UK government.
Capitalism is the most popular economic system on Earth. What went wrong? It is important to note that the world today is not like it was before in the 1980s when the central government of a country has full control over the county’s economy. Today, the economy of a country is placed in the hands of private institutions who play the game of business on the global market.
The problem we face today is caused by two parties – the debtor and the creditor. People who have insufficient funds take huge loans from avaricious mortgage companies who willingly offer sub-prime loans with a quid pro quo contract of higher interest rate in return. The flaw in this system is that most sub-prime loan takers renege on the loan and cause a major hit on the economy.
Knowing the major flaws in capitalism, is it then rational to conclude that capitalism is a failed system and move on to socialism? Probably not. In every system there is an ideal that most people consider to be utopian and unattainable. The ideal of socialism is perpetual equality among the people through a government who controls businesses in a country. The problem with socialism is that the system depresses the rich to the level of the indigent and cause eternal inadequacy.
To solve the problems faced in the capitalist system, the capitalist government should have some control over certain companies through laws and legislations to ensure the safety of the country’s economy. You may now stop and say, “Hey, wait a minute, that’s socialism!”
I say: At least I have the opportunity to stand on my feet again in this form of capitalism!
Aha. The sub-prime martage crisis is a real threat towards world economy. Although it affects mainly USA, but since most of the nations’ economy are dependant on the US, thus it could affect the world seriously.
A possible outcome for current capitalism is to ‘add-on’ some of socialism’s ideas to balance up both, to chieve the best condition for all. Socialism is not all bad. Capitalism is not the best either.
It is known that the US Dollar is not backed by bullions.
Bailing companies out using money that are created from ‘thin air’ doesn’t sound right.