Socialist solution to Capitalism?

The crisis suffered by the world’s economy today showed the inherent flaws of the capitalist system. The imbalance of productivity between countries, and the predator instinct of the capitalists are the main causes of system contradictions that usher extreme economic gaps in the social structure of many countries. I know that capitalism is still far from perfect, but governments should have learned from the several incidents of economic crisis in many countries during the past 3 decades. These were signs that the system’s flaws were taking over from what many thought as the natural process in the golden age of capitalism. The great depression of 1926 that ended before the Second World War was a failure to adjust to the systemic flaws of capitalism. Capital from speculative source such as shares of stocks and government bonds are too risky for a system that is influenced by voracious companies who wanted to control every inch of all free trade. The system was never reformed and instead reinforced after the war. The concept of “market is good and government is bad,” freed the market further that detests government interventions. The system’s failure was highlighted by the malfunction of globalization as a strategy to even the market. Instead, globalization heightened the contradiction of the system who continually strives for sustained increase of demand of products produced from cheap labor. This in itself is a contradiction – for how could you increase demand if wages are low? Wage earners that compose the majority of consumers have very limited purchasing capabilities. Instead, inequality gap between the few very rich and the many poor increased. Moreover, there is a wide gap in terms of productivity among rich and developing countries. Many large companies from rich nations transferred their factories to countries that offer cheap labor in order to compete. Yet their main markets are the rich nations whose population incomes are shrinking. Greed and lack of government intervention, the capitalists in these rich nations continue to accept financial investments that are excess of other countries such as financial capitals from China, Taiwan, South Korea, Japan and many other investors from other countries to support their insatiable need for profits. Housing loans in the US suck up more than 111 trillion dollars of capital from all sources. The loans were offered at low rates with very relaxed terms. The availability of money made the low income earners borrow beyond their capacity, and many are engaged in unproductive speculation – such as investing in stock markets. Suddenly, the feast ended. The system exploded! Stock values of companies worldwide collapsed, and invested capital including company equities melted. In the United States of America, the end of Lehman Brothers and Merrill Lynch, two of the largest Wall Street investment banks, one week after the government takeover of the mortgage finance giants Fannie Mae and Freddie Mac, marks a new stage in the convulsive crisis of capitalism.

However, this event exposed the other side capitalist thought that firmly abhors government intervention. I wonder if, this could be the beginning of a capitalist system that allows government intervention in a “free market?” This is a strange. Rabid capitalists would never allow government to have significant control over the economic affairs of the nation particularly the market. But now, they are begging for it. They wanted the American Federal Reserve to buy toxic assets of companies that are on the verge of bankruptcies. They fear that without the government’s money, investor’s confidence to the capitalist system will be lost. But at what extent? If the American government agrees to intervene, this would mean that the defenders of capitalism agrees to the thought, that soon the government will have direct control over the much touted free market economy! The socialists must be too delighted by the capitalists’ change of heart. For comments, e-mail at: roldanalex@yahoo.com

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