Capitalism - cause of Global Economic Crisis - Essay Example

Roubini has little doubts about the fact that capitalism is being doomed because the governments have failed to find out solutions to the problems caused by the system of market economy. The governments and policy makers took a number of different steps to bring the economy back on track but all policy measures taken to prevent the downfall of economic system failed one after the other. As the last resort the governments are trying to bring stability to the economy by cutting the expenditures however this will not be able to bring the economy back to track until new taxes are levied or the previous raised.

Most of the countries that are following the principle of market economy have failed to restore the living standard of the public despite giving salary raises and subsidizing commodities because the effect of raised taxes is much higher as compared to the monetary assistances provided by the governments. Injecting more money into the failing economy in the form of bank bailouts is not an available option now for most of the countries because of the increasing political and public pressures because such measures are taken at the expense of public welfare expenditures which is totally unacceptable to the already suffering people, moreover another series of bank bailouts is also economically unfeasible.

Currency depreciation is an option because a weaker currency and better trade balance can restore the economic growth but rendering the currencies weak is not an option for economically advanced countries therefore currency wars are currently in order. The Eurozone countries managed to help their cause a bit by the establishment of the European Financial Stabilization Facility but in the current circumstances the ESFS will not be able to pay bailouts for countries as big as Italy or Spain because of the limited assets whereas adding to the assets of ESFS is not possible because currently no country in Europe could sponsor such a move and this will receive resistance from countries like Germany.

In effect, the capitalist system of economy has stuck itself in a circle of self-destruction as suggested by Karl Marx where jobs are being cut because of the lack of demand in the market and this cutting of jobs is further adding to the lack of demand resulting in more job cuts and so on and this is the approach which has been adopted by the followers of the Keynesian system. The world currently is facing the problems which were predicted by the critics of capitalism hundreds of years ago such as poverty, unemployment, hopelessness, lack of basic facilities of life and the most important of all which can be considered as the root cause of these problems is the increasing inequality between people (Roubini, 2011).

In the end Roubini suggests that there is a need of “investing in human capital, skills and social safety nets to increase productivity” and this can surely be the only possible solution to the present economic crisis. According to Roubini the present economic system based on market economy has essentially failed to provide effective solution the problems faced by man therefore a modified capitalist model is required to take over. Sen on the other hand gives prime stress to find out what exactly is the problem with the economic system of the present time and put forwards