Financial Crisis a Crisis of Capitalism Compare Essay

Download this Essay in word format (.doc)

Note: Sample below may appear distorted but all corresponding word document files contain proper formatting

Excerpt from Essay:

financial crisis a "crisis of capitalism?

Compare and contrast the theories of Susan Strange, Karl Polanyi and Giovanni Arrighi. Explain how three of them accessed issues of Financial crisis and its relationship with capitalism

Starting from 2008 onwards, we are currently experiencing an unremitting state of economic recession. Each of the three theorists stated in this essay have different perspectives of whether or not the recession indicates crises of capitalism. Whilst Susan Strange and Karl Polanyi have a more optimist perspective on the subject and indicate that rather than crisis, the recession may, in effect, be, in the first case, a misplaced paradigm (or different, tortured perspective) and in the second case, only a slight wrench that necessitates government intervention for amending a temporary situation, Arrighiri sees the situation as indeed manifesting something that is intrinsically, irremediably, and inherently wrong in the structure of capitalism itself. Each of these views will be dwelled on in turn, and each will compared and contrasted in order to assess their perspective to the financial crisis and its relationship with capitalism

Susan Strange on Capitalism

Susan Strange published Casino Capitalism (1996) at a time when few others realized that the world of finance was growing and dominating the world in a global way devoid of production. Written in the1970s, Strange realized that finance was becoming a global phenomenon breaking free of states and of industrial production. Nixon's sundering the dollar from gold and the World Wide Web would lead to these phenomena where finance would represent global markets that would be active 24 hours, 7 days a week.

In Mad Money: When Markets Outgrow Governments (1998), Susan argued that governments harbored mythical beliefs that what they had created rested on an eternal order, or on the beliefs of an 'invisible hand'. Similarly too were they mistaken in the assumption that their bogus systems and inflated loan systems could be willfully sustained.

Their erroneous belief that they had created something natural and eternal was, she argued, based in ignorance of history.

To elaborate, historically nations operate on myths. The Aryan nation, for instance, believed itself to be of a superior race, and America, too, believed that it has certain hegemony in the sector of economic advantage (America is the country of gold and opportunity"). Today, many believe that America has lost its hegemony and become just like others (as witnessed by the recession). This too, according to Susan, is a myth and dangerous.

In historical memory, the optimism of the United States gave itself and others a new and better and attainable future for the world. Today, the myth of lost hegemony is apt to introduce in everybody "only pessimism, despair and the conviction that in these inauspicious circumstances the best and only thing you can do is fight for your own self-interests.." (States and markets, 1998, 204). This can be a dangerous thing, as Strange notes since it spells anarchy for a nation and leads to lack of cooperation.

These and other academic notions are erroneous.

The world has changed, and America has not lost its power but simply has to adjust to a global economic market that dances to a different political tune. At one time, states competed over territorial possession. Today, they compete over market share as the surest means to greater economic security. In their search for greater market share and wealth, business on a local scale is no longer sufficient and the competitiveness has taken global proportions. "The most successful and industrialized countries are those who have been able to take and keep a larger share for the world market for goods or services or both" (224).

This reality has been hidden from the U.S.A. due largely to its largeness, and it is still not completely aware of the fact. It was Japan that was more cognizant of this state of reality first, and not having the benefits of the defense contracts of the U.S., was obliged to find other means to apply existing technology and hence turned to the global market as means to do so.

The USA is the foremost nations in terms of defense. It used to dominate too the world's production structure. Today, some American economic analysts state it to have lost that power, but Strange thinks this to be a misperception. A perusal of all of the top 1000, 500, or 100 world corporations shows over and again that the leading names are American and that the decision-making power of production for the world is accordingly over and again American. This is due to the fact that the U.S.A. provided the first large mass market for manufactured consumer goods and its laws and policies therefore shaped the corporations that dominate the market. Operations and mores of today's business world were created in America; developments in the U.S. still influence developments elsewhere.

Finally, America also has the power to dominate and control the supply and availability of credit that is dominated in dollars. The dollar currency is the only assets that are saleable and credible worldwide and thus America controls the world's monetary system.

And then, besides all of that, America is also preeminent in the knowledge structure. Knowledge is the most sought after, prized possession for whoever can create something that others seek and are interested in is able to dominate. Today, the most sought after knowledge structure is technology, and America has the lead in this.

Taking all of these aspects into consideration, the assumption that America has lost its power and no longer dominates is solely that a myth. Americas still has its hegemony, perhaps more now than ever before, but its analysts and it fails to see it due to the shifting of paradigmatic perspectives of power. At one time, territorial rights defined a country's might. Today it is the extension of global market possession. With a shift in its perspective and elimination of the myths that propel it, America will realize that the current financial crisis does not spell its doom nor represent a crisis of capitalism. On the contrary, America is as strong as ever. Economic and political realities have, however, shifted, and America needs to adjust itself to this new situation. Doing so, it will realize that rather than crisis existing, opportunity may be a better perspective of the situation.

Polanyi on Capitalism

Polanyi challenges the assumptions that there is anything 'unnatural' about the modern markets. Modern markets have cultural and political underpinnings and are the outcome of modern industrial society. It has to be regulated and controlled by the state. They are human and contingent entities contingent, based solely on human and social affairs. There is no such as a 'hidden hand' and therefore their doings and operations are and have to be monitored by the state.

In the preface to Trade and Market in Early Empires, published in 1957, Polanyi and Arensberg said that

We asked, abstractly and analytically, what social action does the free market entail ...

... they [the economists] agreed with us upon the following tentative formulation: In the free market of supply and demand, a man can reverse roles, being supplier or demander as he can or wills. A man can go to this market or that as he sees his advantage; he is free of fixed and static obligation to one center or one partner, he may move at will and at random, or as prices beckon. He can offer to all and any comers, dole or divide among them, "corner the market" so that they all pay his price and so dance to his tune. .. (p.225)

Capitalism, as Polanyi, argues is generally seen as a system of traders and merchants who are seeking profitable opportunity. How this happens has been explained in the past by economists such as Adam Smith who have attributed it to 'behind the scene' rules such as an 'invisible hand' of competition where competition drives profit. The emphasis is on the merchants and traders, but ignores the whole area of production. Capitalism requires a market for labor and this market cannot be a naturally occurring and freely functioning entity. By defining it as a purely self-regulating entity as classical economists did, such n entity, Polanyi argues cannot exist. It needs more and what it needs, he says, is to be protected by the state. Capitalism must be restrained. The unrestrained, unregulated allowance of pure competition will be destructive for companies and for nations. In order, therefore, for productivity to be most successful it needs the world's -- or nations' intervention to help it succeed and to control it.

Land and money can also not be valued at their cost of production and, therefore, also do not share the laws of capitalism. For this reason, the state too has to intervene in monitoring these aspects.

In fact, as Polanyi points out

"Economic history shows the genesis of national markets was not the consequence of the slow and spontaneous emancipation of the economic realm from state…[continue]

Cite This Essay:

"Financial Crisis A Crisis Of Capitalism Compare" (2011, August 23) Retrieved December 6, 2016, from http://www.paperdue.com/essay/financial-crisis-a-of-capitalism-55265

"Financial Crisis A Crisis Of Capitalism Compare" 23 August 2011. Web.6 December. 2016. <http://www.paperdue.com/essay/financial-crisis-a-of-capitalism-55265>

"Financial Crisis A Crisis Of Capitalism Compare", 23 August 2011, Accessed.6 December. 2016, http://www.paperdue.com/essay/financial-crisis-a-of-capitalism-55265

Other Documents Pertaining To This Topic

  • Capitalism and the Global Environment

    Capitalism and the Global Environment A framework has been formed by capitalism according to which the world is not responding to the environmental changes. Capitalism produces (or is formed by) a number of environmental changes and lays down the foundation for the social relations and for all the political institutions. This thus demonstrates our potential to respond to the changing environment very efficiently. But still the learners of global environmental change

  • Financial Institutions & Global Poverty

    Secondly, the projects are diverted away from its target population because state institutions of these poor countries tend to be weak and inefficient. And in the process, we only encounter the "iron law of political economy" in which the resources that were initially allocated to the poor tend to flow towards those who possess more power because the state is inefficient in regulating these resources. Thirdly, the political dimension

  • George Magnus Is a Leading Economic Advisor

    George Magnus is a leading Economic Advisor at the UBS Investment Bank and has been a rebel around different systems in the world. George was employed in the UBS investment bank from 2004 till 2012. Along with being the senior economic advisor, he also played the highest level economist from 1997 till 2004. Prior to working for the UBS, he was working as a chief economist in SG Warburg from

  • Influence of 2007 Economic Crisis on American Car Market

    2007 Economic Crisis on American Car market Effect of the 2008 global economic crisis on automotive industries Crisis in the United States Crisis in Canada Crisis in Russia Crisis in European markets Crisis in Asian markets Effects by other related crisis events In this paper, we will review the effects of 2008 global automotive crisis. Our main focus will be on the American car manufacturers and the negative impact they suffered due to the crisis. We will

  • Food as a Public Good and Obesity as an Externality

    Health Public Good Public Health as a Public Good The United States has one of the lowest cost food options available to its consumers in the world. For an extended period, people assumed that this was a benefit of capitalism and that competition had helped push down the prices and made food available at lower costs through the market. However, many externalities have arisen in these circumstances that are now pointing researchers

  • Economics Crisis as an Inevitable

    The U.S. is a property owning civilization and a number of the people wanted land and housing. Americans however scarcely ever create savings. "The country itself lives on other countries' savings by issuing bonds to finance its excessive consumption. The current crisis began with cheap housing loans offered by banks. Banks provided loans but instead of holding the loan in their books, they packaged them into collateralized debt obligations (CDOs)

  • Future of Capitalism

    Future of Capitalism Current Economic Crisis according to Schumpeter and Keynes A justification of the economic crisis can be precisely explained by shedding light on the perspectives of famous economists. The information gained through this method will not only be informative but will also motivate further research. The two economic theorists chosen are Joseph Schumpeter and John Maynard Keynes (Blankenburg & Palma, 2009). Their thoughts appear to be most pertinent to this


Read Full Essay
Copyright 2016 . All Rights Reserved