Business Schools and Responsibility for Preventing Financial Crisis - Essay Example

are currently facing. But it has been argued by several observers that the business schools have failed to provide preventive measures for current global financial crises. These observers have argued that lack of relevance of these business schools, showing unethical behaviour of these business schools and creating negative impacts on the people and firms or business organisations are creating barriers for providing preventive measures in favour of prevention of current financial crises. Many observers have argued that managers after getting passed out from the best business schools do the same job in banking sectors or in the share markets which can be done by people having no background of studying in business schools (Canals, 2009, pp.42-43). These managers are adding nothing new in these sectors.

Business schools bear a certain responsibility for (not preventing) the current financial crisis. Nature of current financial crises: Almost all the economies of the world are facing problems in regard to their economic growth process due to the prevalence of financial crises that these economies are facing mainly since 2006-07. . These are resulting in further decline in global income and hence decline in people’s purchasing power. According to many researchers, including Noble laureate Paul Krugman, these global financial crises are results of poor and ineffective banking and financial system of the developed economies of the world like European economies and mainly American economy.

According to Paul Krugman the banking and financial system of these economies has been largely dependent upon the free market forces. These banking and financial systems had no control over the funds or assets which are circulating in the global economy. They became more and more concerned about creating new funds and hence they have started to provide more and more loans to people and business organisations. But when one defaulter defaults to pay his loan, the entire system collapsed due to the fact that the structure of providing loans was dependent on multiple layers.

When one lower level of layer collapsed, the entire structure first became unstable and then it collapsed. But the most notable impact has been realised when there occurred a significant reduction in Gross Domestic Product (GDP) in the major global economies of the world, mainly in the European countries. Between 2009 and 2010 rate of fall of GDP in the countries of the European Union has been estimated as 4%. This high rate of fall of GDP forces many countries of the European Union, such as Greece, Portugal, Italy and Spain, to take loans from International Monetary Fund (IMF) and World Bank.

These nations are also forced by these international organisations to curb down their public spending on different goods and services, including production and consumption expenditures. In this context these countries cut down