The Downfall of the World Economy - Essay Example

? JOSEPH STIGLITZ AND THE DOWNFALL OF THE WORLD ECONOMY: A CRITICAL ANALYSIS OF ECONOMIC PERSPECTIVES AND ITS IMPLICATIONS ON SOCIETY, CULTURE AND MORALITY By (Name of Student) (Course Name) (Name of Professor) (Name of School and Location) (Date of Submission) Economic stability, being considered as the backbone of socioeconomic success of many countries, has been influenced and framed using different critical perspectives through time. In human history, we see that society’s economic sector has always been given much importance than any other aspects of social structures. Moreover, it is also observable that local and international economic development has exhibited the rise and fall of different approaches in the field. Thus, conjuring perspectives in social and economic programs have continuously battled through time. In this regard, we see that many aspects of economic, political, social, and cultural motivations underpin the processes of the society’s development. Changing political and social approaches is thus fundamental to forming new economic platforms and social goals. In Freefall (2010), Stiglitz re-establishes the ‘government-intervention’ approach (see Keynes 1926) to market economy by criticizing the current malfunctions of economic trend present in America and subsequently in most parts of the world. In his book, Stiglitz (2010) was able to illustrate the risks and failures that the ‘free-market economy’ (Smith 1776) encounters. Stiglitz (2010) enumerated the downfall of many aspects of social welfare, particularly the conditions of inequalities, by referring to many examples of the imbalances of power in the economic and political realms of the society. Freefall (2010) uncovers the allegedly ill-founded traditions of economic practices in America and other affected countries in the international arena. The book suggests change in approach and perspective in determining the more suitable policies towards economic stability and development. In this paper, a critical discussion of Stiglitz’s (2010) analysis of the present economic situations as drawn from the Great Recession in America will be presented. In line with this, the opposing arguments of the free-market and government-intervention economic perspectives will be examined in order to understand better the background of Stiglitz’s essay. Moreover, looking at the backdrop of the practiced economic programs, the effects of such accounts on the local and international conditions will also be talked about. In here, the influences of globalization movement will be substantiated and analyzed in terms of its effect in the local and international social welfare and economic status. The effects of the discussed perspectives in relation to culture and society will be considered. In addition, a discussion of the moral and ethical conditions underlying the issues will be examined. Thus, in this paper, a critical exploration of the perspectives involved in the matter will be done in order to see the significant points Stiglitz suggests in his essay. The Old and the New Economy In Freefall, Stiglitz (2010) emphasizes the grave conditions of world economy as a misleading approach to economic policies continues to prevail in the United States and subsequently in peripheral countries particularly in Asia. The Great Depression and the more recent Great Recession in the United States have tremendously shown how the local and global economy was constructed on a ‘sinking’ foundation (Stiglitz 2010). Stiglitz profoundly highlights the ill-conditions of some of the biggest international organizations facing economic retaliation namely the United States Treasury and the International Monetary Fund (IMF). The long-practiced economic advocacy echoing Adam Smith’s laissez faire tremendously affects the world political-economic trends in history primarily through the said international organizations. In this regard, the political underpinnings of the world economic framework are apparently magnetized by the free-market policies. This significantly structured many local and international economic frameworks with regards to market trades and monetary saving and investment patterns. The tradition requiring confidentiality and isolation from the rest of the social and governmental motivations arguably creates repercussions reflecting the allegedly ‘one-sided’ development frames. Through the influential powers of United States’ economic approaches, with the aid of the international organizations like IMF and the World Bank, the impact of the ‘old’ economic practice create momentous downfall not only in America but also in many countries using the said political-economic perspective (see Klein 2011). The Two Economic Perspectives and the Arguments Throughout the human history, two prominent economic perspectives dominate the economic sphere of the United States and of the global arena as a whole. On one hand, the Laissez Faire paradigm encourages the economic sector to isolate the market system from the government rule; that is, the state (Smith 1776; Davidson 1996). This promotes private businesses to grow and develop advantageously without interventions from the external bodies. Thus, it is appropriate to say that this paradigm carries the spirit of capitalism as it steers its way to economic development (Schweickart 2001). On the other hand, in contrast with the former, Keynesian economic perspective emphasizes the need to balance the market trade and state control over it (see Keynes 1926; Stiglitz 2010). In this perspective, the state was given its role to monitor the economic activities of the nation in order to make sure that other aspects of the community like social welfare and long-term financial security will not be compromised. However, capitalism prevailed as free-market economy is being considered by many as the most effective strategy, if not most profit-giving, in achieving economic success. Patterned with countries belonging to the First World, many Second and Third World nations followed this trend. Due to the broadening of this trend, the perspective fueled by the development promises of capitalism, spreads out until capitalism dominated both the local and international communities. However, through these phenomena, multitude incidents of inequalities come into being. The imbalances of the economic tradition retaliate as the Great Depression and the recent Recession in the United States happened. This retaliation is supposedly not a big surprise since long before it happened, scholars and intellectuals like Keynes and later Stiglitz have predicted this downfall of capitalist framework. Stiglitz is very much particular on criticizing the Laissez Faire framework as it allegedly promotes poverty and economic insecurity in the long run. Thus, he argued that through this trend, businesses only become more and more oriented in a wrong way. Banks and insurance companies continue to deceive people just to accumulate funds and investments. Stiglitz views free-market trade and capitalism as something that must be changed in order to create a more sustainable economy. Local and Global Implications The recession in America marked dramatic changes in economic conditions both in the local and international spheres. Since the United States Treasury and other international monetary organizations politically inclined in the trend declared the downfall, many peripheral countries suffer and feel threatened of the probable retaliation of the economic trend in their areas. Looking at China as identified example, Stiglitz claimed that the involved country’s economy is vulnerable and is also sinking economically in time (Stiglitz 2010). Thus, because of the patterned economic model, China, among others belonging to the developing countries, will experience the backlash of free-market capitalist paradigm. Consequently, it is argued that many aspects of development have been compromised because of the growth of capitalism. Indeed, many industries and businesses tried to copy the framework and develop mechanism similar to what the rich countries used. The system used in banks and investment firms continues to be strict and more money-grabbing. Many individuals involved in the matter consider every process as necessary for growth and development first of the industries and more importantly, of the nation. In the process, other significant aspects are compromised as people appear to choose taking the risks required by the economic system. We can imagine people disregarding morality in a way that they seemingly ignore the welfare of people in many instances as pointed out by Stiglitz (2010). The local and international outgrowth of free-market trade and capitalism creates colossal effect among involved nations, particularly among different social traditions and cultural practices. In a way, in addition to the rising globalization phenomenon, the world communities were forced to pattern their practices and lifestyle to the reigning nations. In the international arena, we see how the system of free-trade and capitalist framework induced inequalities among nations. The implications of the trend are reflected upon the distinct conditions of the western and eastern countries. Rich countries which are generally coming from the west continue to victimize and exploit nations from the eastern global region. Thus, free-trade consequently produces many negative implications especially when it comes to global equality. The Lure of Globalization Era We see that through globalization, free-market trade and capitalism inevitably grow in the international scene (McLaren et al 2003). As observed by many countries, capitalism seems to '‘prove’ its effectiveness in achieving economic success and stability. However, through globalization, many nations are also deceived by the overpowering structure of capitalism as observed in rich countries. The sinking path is not entirely realized particularly as countries from Second World and Third World communities deny the possible downfall. Capitalism continues to be given significance in achieving economic goals. Though not totally debunked for we see that it conquers many possibilities, capitalism and free-trade market policies are not entirely sustainable (Stiglitz 2010). Through capitalism in addition to the spirit of the time, people from all parts of the world suffer from its repercussions. The imbalances in the local field as economic sector was the only one growing became global because of the perceived success capitalism promised. The issue becomes more and more complicated as fundamental aspects of globalization continue to prevail. In the process, imitation of economic frameworks happens among many nations as they regard the matter flawless and economically satisfying. Government Intervention and the Power of the State In his essay, Stiglitz (2010) describes how the economy can be more daring if the risks and experienced failures are to be continuously ignored. Pointing to the significance of the state, he argued that change in perspective will make the society better particularly on giving the necessary needs and security among the citizens. The welfare of the people is very important aspect of development for through the assessment of their security we can see in practical means the effectiveness of the development programs (Stiglitz 2010). In the traditional economic perspective, the only one growing and becoming more and more successful are the small portion of the community where rich owners of private and public utilities belong to. Most of the people are suffering from poverty. As given, because of the downfall of the economic firm, many consequently suffer as people lost their jobs and investments in banks and insurance companies. In analysis, we see that the masses are the ones who were more affected by the downfall not really the owners and managers of the sinking industries. Through this, we see that exploitation from the very beginning of the free-market system exists as the framework requires. Thus, emphasizing this phenomenon, Stiglitz (2010) argued for making the state more invasive of the economic matters in the country. Bringing back the power of the state to intervene with the economic activities, the new economy or ‘republic’ will be put into practice and thus, will create a necessary solution to the declining welfare of the state (see Skocpol 1985). Arguably, the state should make policies that would make the economic entrepreneurship open to public. Providing enough information about the economic statuses of the industries including the banks and other monetary-related industries will assure the public's trust and reliance. Though they may be vulnerable to scrutiny, what is more important is the process of balancing the poles of social development. In making policies that would carry on programs where the economic and social welfare sectors of the community will cooperate, a better future for the society will come in. Thus, as for Stiglitz (2010), the real development is central to this new economic strategy patterned to Keynesian paradigm. Government intervention and the power of the state are significant in keeping the balance among all sector of the society. It more importantly avoids some sort of inequalities and exploitation of the powerless in the community by the economically stronger sectors. The New Economy and Society As discussed, we see that prior to Stiglitz’s notion of the new economy, the free-market system is by large creating marked inequalities and instances of exploitation among people (see Marshall 1997). The society’s economic venture is central to the development and success of the nation yet as pointed out, taking steps to create balance among the involved components are necessary to achieve a more stable growth. The people are now more aware of the risks and repercussions of capitalism and development. Financial and economic success must be of long term basis. Thus, in the new economy, the society will open new strategies to make sure of the balanced development that will be given to the citizens as achieved by the economic firms. Economic development would not be very pleasing if there are people and other things being compromised and exploited. Thus, we see how economics, politics, social and cultural norms and morality complexly intermingle among one another in the dynamic process of struggles for development and growth. The Economy and Individual Morality In the situations of the banks and investment establishments, we can see how economic goals can frame people's mind as they were guided to do anything for the sake of accumulating more money in the process. The degenerative process of capitalist ventures is central to this phenomenon. Primarily because of capitalist urges, as pointed out by Stiglitz (2010) among other scholars and intellectuals (see Dunning 2003), people become differently oriented in the way they see development in the capitalist light. Individual morality has been put into question as the discussed events happened in time. In this regard, moralists are blaming the system of capitalism as they see how it molds people's mind and behavior as observed in practice (see Haslett 1994; Gilder n.d.). In here, we see that there is an apparent basis on stating the need to change the economic perspective used in many states. The morality and ethical concerns involved in the matter are significantly affecting many people. Through reiterating the morality of free-market capitalism, we also see how scholars and economic experts like Stiglitz claim the need to modify and change the system so that, a more sustainable practice will be achieved. Generally, the processes in which the critical perspectives are drawn from encompass different issues and complex dynamics in the social system. Matters involving morality as inequalities and exploitation among people are present are being analyzed and questioned. Thus, in this paper, we see the importance of weighing the perspectives in order to see the advantages and disadvantages in line with the objective to understand better the backdrop of the traditional and proposed economic frameworks. The political, social, cultural, moral and ethical issues are considered and recognized to be of significant value in the process of exploring such in relation to economic development process. Works Cited Davidson, P. (1996). Reality and Economic Theory. Journal of post Keynesian Economics, Vol. 18, No. 4, pp 479-508. Dunning, J. (ed.) (2003). Making Globalization Good The Moral Challenges of Global Capitalism. New York: Oxford niversity Press. Gilder, G. (n.d) Moral Sources of Capitalism. Retrieved from http://www.springerlink.com/content/t33212474440l05w/ Haslett, D. (1994). Capitalism with Morality. Oxford: Clarendon Paperbacks. Keynes, J.M. (1926). The End of Lassez-Faire. London: Hogarth Press. Klein, N. and McKibben,B. (2011). Our Lives Are Under Threat From Some of the Most Powerful and Richest Entities Here's How We Can Fight Back and Win. Retrieved from http://www.naomiklein.org/articles/2011/04/our-lives-are-under-threat-some-most-powerful-and-richest-entities-heres-how-we-can Marshall, G. (1997). Repositioning Class Social Inequality in Industrial Societies. London: Sage Publications, Ltd. McLaren, P. and Farahmandpur, R. The Globalization of Capitalism and the New Imperialism Notes Toward a Revolutionary Critical Pedagogy. In Dimitriadis, G. and Carlson, D. (2003). Promises to Keep: Cultural Studies, Democratic Education, and Public Life. New York: Routledge. Schweickart, D. Against Capitalism. In Schaff, K.(ed) (2001). Philosphy and the Problems of Work. Boston: Rowman & Littlefield Publishers, Inc. Smith, A. (1776). The Wealth of Nations. London: Methuen & Co., Ltd. Skocpol, T. Bringing the State back In: Strategies of Analysis in Current Research. In Evans, P. et. al. (1985). Bringing the State Back In. Cambridge: Cambridege University Press. Stiglitz, J. (2010). Freefall America, Free Markets, and the Sinking of the World Economy. New York: W.W. Norton & Company. Read More