Economic and Financial Crisis and the Great Depression of 1930s - Assignment Example

After the crisis, it was important that mainstream economics begin reconsidering the effects their work might affect the economy. However, it is worth observing the fact that despite the crisis, for the Neo-Classics, they responded by defending their position and even made it clear that the crisis was a confirmation of their view.

It is understandable that the disunity amongst economists become more pronounced after the economic and the financial crisis mainly due to the resemblance of the recent financial crisis to the great depression of the 1930s in both policy orientation and on doctrine issues. The principal policy problem of the 1930s was unemployment which was then traced to rigidities that prevented the free working of the capitalist system and it was then determined that the major rigidity was an obstruction to the downward movement of wages, making the crisis a matter of confidence which could not find cure either on fiscal or monetary expansion.

Looking at the current crisis, it is evident that the crisis was triggered by the collapse in the banking system which was a big wake-up call for the Neo-classical mainstream economists as it was clear proof of ill preparation for the crisis owing to the cold shoulder extended to the financial sector. However, on the other hand, the New Keynesians and the New Institutional Economists were presented with the first opportunity to employ the use of fiscal and monetary expansion to halt the contraction of the financial sector. Therefore, theoretically, as a matter of fact, neither economics nor the special branch of economic history is capable of doing its work entirely without help from the neo-classical theory.

The Dynamics of Environmental and Economic Systems

The last quarter of a century has seen the economy-environmental dynamic become subject to the concept of the environment and humans. The last decade has seen an increase in alarming abuse of and exerting of excessive pressure on the environment resulting in devastation on a grand scale most notably in the developing countries. Most of these instances have continued to be triggered by the pursuit of prosperity and the desire to experience economic growth by most of the wealthiest countries in the world. It is however sad to note that these are accompanied mostly by the lack of perspective thinking accompanied by no ecological awareness by other communities and the ruling elites amongst themselves. Despite this, there is a need for barriers of either ignorance or insensitivity to issues regarding tolerating ecology.

It is important that barriers of ignorance and insensitivity are overcome in addition to triggering a more in-depth reflection as regards communities and mismanaging of the environment since it must be realized that similar attempts had long been made before the formulation of the concept of sustainable development.  All this has been outlined in Limits to Growth by Dennis Meadows, all contained in a book to an association of economists, politicians, and scientists. Interesting to note would be the conclusions of the book which stirred quite a lot of controversy as it postulated the collapse of the global systems with the following 100 years. Among other things include a drastic drop in global production that would be accompanied by massive unemployment a reduction in food production and an increase in the fatality rates. This needs to serve as a warning shot.