Global crisis reason to rethink market economies - Andrew Ojede
In the 1930s, the US banks were the flagships of American economic might, and emulation by other nations of the fiercely free market financial system in the United States was encouraged. The recent financial crisis in the US and currently propagating through the entire global financial systems has its roots in the previous global financial crises that occurred in the 1990s and early 2000s. Capital movements were directed toward the US market with low interest rates, but with little or no regulation. Many American consumers, even those without sound credit history, became over-leveraged. There was explosion in sub-prime mortgage lending – lending at an adjustable interest rate to American consumers without sound credit and amidst uncertain future income. The financial turmoil threatens to put the banks, at the heart of the US financial system, partly in the hands of the government.
An economy based on the free market cannot function that way. It is reasserting itself in the lives of American citizens in ways that were unthinkable in the era of market-knows-best thinking. The hands-off brand of capitalism in the US is now being blamed for the easy credit that sickened the housing market and allowed a freewheeling Wall Street to create a pool of toxic investments. Many critics now view the heavy intervention in the market as further robbing Washington of the moral authority to spread the gospel of laissez-faire capitalism.
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