Global Financial Crisis Review - Essay Example

The article, “Global Financial Crisis Review” by Anup Shah is generally about the global financial crisis that started in the year 2007 and reached its peak in the year 2008. The two main themes of the article are the global financial crisis, and the collapse of financial institutions brought about by the global financial crisis. Besides the two main themes of the article, the article also highlights the theme of conflict; the theme of conflict discusses the divergent views and opinions among various scholars on the causes of the global financial crisis.

Shah notes in the article that the global financial crisis started in 2007; Shah also notes that the global financial crisis led to the closure of many financial institutions around the world (Shah, 2013).

According to this article, following the global financial crisis, various governments had to bail out various financial institutions that were on the verge of collapse. Shah, however, notes that, although various governments bailed out various financial institutions that were at risk of closure, the problem of the global financial crisis was mainly caused by the very financial institutions that sought bailouts from the government. A critical view of this point by Shah shows that the financial institutions were indeed mainly to blame for the global financial crisis. This is because the lax lending standards of many financial institutions made many people unable to access loans and mortgages, leading to a serious financial crisis. Fratianni and Marchionne support this view in their article “The Role of Banks in the Subprime Financial Crisis”.  According to the two authors, it is the exorbitant lending rates of many financial institutions that mainly caused the global financial crises, besides the imbalances in international trade (Ratianni $ Marchionne, 2009).

In this article, Shah claims that the global financial crisis did not affect the financial institutions only or only the rich nations, but it affected all individuals of every nation.  This is because, according to Shah, the effects of the global financial crisis trickle down to all people and affect individuals’ livelihoods.

One of the main arguments advanced in this article is that the financial crisis could have been avoided if financial institutions had adopted the current economic models. According to Shah, the global financial crisis has been caused by people’s negligence, especially the government's failure to effectively control financial institutions. Shah argues in the article that states have been neglecting the current economic models, which can help a great deal in resolving many economic problems. A critical view of this issue shows that Shah is indeed right because, without proper and effective control of financial institutions by the governments, there is bound to be a financial crisis in a state or in a country.

Another important point that Shah makes in this article is that there is a need for an overarching international authority to govern the behavior of states on matters of finances. Shah notes that, instead of an overarching authority to govern the behavior of states on financial matters, many countries have a foreign policy, which governs their relationship with other states. Shah argues in the article that foreign policies cannot ensure an equal standard of financial management in different countries or states. Shah, therefore, concludes that there is a need for an overarching international authority to ensure cooperation among different nations, so as avoid international trade imbalances; such an international authority would also help to resolve many disputes among nations on matters of trade.

Considering the fact that economic interdependence and economics itself is an important elements of foreign policy, Shah is right to claim that there is an urgent need for an international body that regulates trade among nations. This is especially true in the contemporary world where there is an increased transnational trade among nations; countries in the modern world interact more through trade.

Shah notes in the article that the problem of lack of international regulation of trade among nations affects all people in all corners of the world; for instance, Shah notes that some people from poor countries move to rich countries in search of greener pastures, due to the problems that result from lack of international regulation of trade among various nations. Shah notes in the article that when one country has economic problems, other countries around the world will be affected by the problem.

In my view, this article clearly explains the reality of a global financial crisis. This is because, as Shah notes, foreign policies of different countries keep on changing, leading to a lack of a standard of doing business among different nations. This view is supported by Fratianni and Marchione, who contend that there is a need for international regulation of financial institutions around the world (Fatianni & Marchione, 2009). As Shah rightly notes, the level of globalization has increased and without the inclusion of the current economic model, a country’s economy can decline. Those economic models that could have prevented financial crisis include qualitative models, stochastic and non-stochastic models. Application of these models will enable a state to carry out economic forecasting and come up with means to solve the economic problems involved. In my view, if these current economic models had been in place, prior to the global financial crisis, the financial crises could not have occurred. I also agree with Shah’s views that an economic crisis in one country affects individuals of all nations.

In conclusion, Shah is right in claiming that the global financial crisis was caused mainly by the unethical behavior of some financial institutions. Shah is also right in his claim that the lack of an overarching international authority regulating trade among nations is to blame for the global financial crisis. Overall, therefore, I find this article by Shah to be describing the reality of the global financial crisis in a very precise and correct way.