The debate on the credit crunch and the subsequent recession of the economy both in the US and Europe has drawn a lot of emotions among analysts and more so sociologists. In the popular media, press, textbooks and social commentary forums have moved quickly amid the current recession and credit crunch to demonize capitalism. Historically, the word capitalism has been used time and again to describe and explain the absolute worst in human nature with little credit given to it. Going from the African slave trade, the Great Depression of 1930’s, the decimation of Central America, colonization of Africa to the Enron, inside dealing, corruption greed and evil have been used synonymously with the term capitalism.
Unfortunately, these critics, not guided by economic wisdom have managed to convert a few fellows into their school of thought, untested and unclear as it is with the best example in terms of the Soviet Union long forgotten. In the confusion presented by modern life and change in market conditions, critics of capitalism are clasping their fingers (Butters, n.d.). They feel so satisfied that their predictions are coming into reality. Alas! Where is the reality? That capitalism cannot sustain itself as shown by the credit crunch. I say unto them that believe so, woe unto you. This is why.
Leaders in this school of thought have failed to appreciate the role of uneconomic factors in bring about the credit crunch. Vices that seem to be bred by capitalism such as corruption, greed, selfishness and lack of respect for human life are also bred by our cultural beliefs and cultural organization (De Soto, 2000).
Capitalism as we know of it today puts us different from where we would have been without it. Big corporations such as Microsoft and Coca Cola as the best examples of the achievements of capitalism among many others have literally revolutionalized life in its entirety. The financial challenge facing these products of capitalism will for sure wither. The genius responsible for developing the basic entrepreneurial idea and nourishing the core idea will for sure rise up again to the occasion and wither the threat.
Borrowing a bit from history, we see the unprecedented birth of capitalism in Europe in the 14th century after the Black Death era subsided. The period saw the economic stability of the whole continent destabilized with millions of farm laborers and owners dying. With vast and extensive lands with very few farm laborers, there was a threat of famine and the social organization of the people. A natural capitalist mind was gradually developed as previously owned laborers started working the abandoned farms for their own survival. With time, the general welfare of the people improved as the real wage of labor rose.
The traditional social arrangement of servant master was quickly replaced by a balanced society. With creation of wealth and better living standards the people realized the benefits of living together in cities in order to organize their common needs into one instead of repetition, or economies of scale rather. As Hobbes and Adam Smith would later come to agree, these changes had seen the poor man growing richer alongside the rich. Unfortunately, part of our modern society constituting those supporting this motion belief that capitalism breeds poverty contrasting what the father of economics beliefs in (Butters, n.d.).
The bail out and stimulus packages have not been in contrast to the teaching of capitalism but to the strengthening of the mutual relationship between the two. On one hand, capitalists have been paying and continue to pay taxes to the government for form of services. As such, the commoner such as you and me have been benefiting from such through education, good roads and Medicare and other government sponsored programs (De Soto, 2000).
Has it ever hit you then that the capitalist market system that you are so ready to bash has been keeping you on the road has it ever occurred to that the government itself has been seeking bail outs from capitalists? While you might not be in the know or have just chosen to ignore it, private companies such as Marilyn Lynch, AIG and others that have sought government bailout in the recent past have been very good business partners with the government through the government bonds market. Dos it occur to you then that the fact that there seems to be a problem with one of the partners that the relationship is over? No, the government has stepped in and capitalism will rise again more than ever.
In a capitalist market where government has no role to play in any of the markets, market forces are expected to maintain equilibrium. In the US and the UK and across majority of countries, the government imposes rules and regulation to guide money markets plied by banks, mortgage companies and other financial institutions. As such, the government interferes with the law of demand and supply in that market. Therefore, incase of government failure in regulating the market then the market is thrown into disarray as the situation is as of now. As such, the credit crunch is a reality check for the government.
In simple terms which I would like to tell you critics of capitalism is that government control is not an option (De Soto, 2000). Why because? The credit crunch is attributed to poor running and regulation of the market and misconduct by the financial institutions. Over time, the government hand has increased unnoticeably in the financial market. This has transformed operations by companies in the market from obeying economic rules to complying with the rules. And how much economic sense do some of these regulations have?
The academic realms of sociology and economics have at time clashed and this debate here is a sure one between these two schools of thought. Economics on one hand argue that in a completely free market that capitalists campaign for is void of government involvement and that market forces are responsible for maintaining an equilibrium situation. In s such a market government has no role to play in setting up regulatory bodies whatsoever.
This gives to what has been metaphorically named as the man eat man society. On the other hand, sociologists as guided by socialism/communism view that the government should own all the means of production. This would men that all privately owned companies would be nationalized. In such a market, competition that yields higher quality goods and services for the market will be wiped out as the government will have absolute monopoly from the production factors market to the product market. This will mean that the government will impose prices on the people and the quality of goods and services will surely go down (Butters, n.d.).
Down memory, we have seen that the global economy has undergone several phases as expected of economic cycles. The Great Depression of the 1930’s is the worst economic position that the world ever found itself in. it was characterized by high inflation, unemployment, low consumer demand and high cost living resulting into general despair by the people. How did the government play its role during this time? How would have socialism coped then? While I do not expect an answer from you who brazenly feel that capitalism is quickly nearing its useful life it is for you to ponder and reflect on that.
The view held by those calling for a review of the system and in their wishes the abolition of capitalism to avert another recession and credit crunch completely ignores the social impact of the so called socialist ideology. In this, I would like to draw your attention to some of the basic human rights. On of them that many of you value a lot yet are against capitalism is the right to own property.
By phasing out capitalism, it would seem that the government will take every thin g from the commoner and the rich and redistribute everything. Is this the way forward? Even Cuba, a country that has long in the past prevented her people to own mobile phones and computers, in the guise of a socialist oriented system in fear of capitalism moving away from the practice. Now an unfavorable economic phase will lead us into denying all the progress made through capitalism? (De Soto, 2000)
Capitalism has survived two world wars and the Great Depression. It won the Cold War. Why would it then be viewed as obsolete after seeing the world through a tumultuous 21st century? In this view, I profoundly and strongly feel that the idea alone that the current economic crisis spells the end of capitalism as we know it is not only wrong but misplaced and denies human progress in the last few centuries. As such, capitalism will again prove strong and lead us into a better economic and social position.
Gertner, J. (2008). “Capitalism to the Rescue” New York Times October 3 2008,
Retrieved on 03/06 2009 from, http://www.nytimes.com/2008/10/05/magazine/05Green-t.html
Butters, R. (n.d.). Teaching the benefits of capitalism, Retrieved on 03/06 2009 from,
De Soto, Hernando, (2000). The Mystery of Capital: Why Capitalism Triumphs in the
West and Fails Everywhere Else, Boston: Basic Books