Global financial crisis continues to harass big economies

Global Financial Crisis (GFC) has badly affected the economies of some countries in Europe, America, Asia and Africa. World economy has been experiencing the worst impact of GFC since the depression started in 2008. Many giant and strong economies have experienced negative growth. Emerging and developing countries too were affected. The impacts so far manifested are: decline in export target, decline in export of manpower, rise in the number of sick industries, industrial and social unrest, reduced growth rate, unemployment, widening inequality of income and many more.
The industrialised countries of the European Union (EU) confronted unrelenting economic tribulations due to the global financial crisis, and mostly experienced an economic slowdown. France, Germany and other countries supported their banks with government loans. The government of Iceland found it difficult to support its highly developed financial sector and was forced to seek assistance from outside. Iceland's government later collapsed due to political pressures stemming from financial turmoil. The same happened to Belgium and Latvia's governments. In part, due to the severity of economic problems in Eastern Europe, the financial crisis underscored continuing difficulties.
The collapse of Lehman Brothers on September 14, 2008 marked the beginning of a new phase in the GFC, unleashing a big blow to capitalism. Governments around the world struggled to rescue giant financial institutions as the fall out from the housing and stock market collapse worsened. Many financial institutions continued to face serious liquidity issues. The Australian government announced the first of its stimulus packages aimed to jump-start the slowing economy. The U.S. government proposed a $700 billion rescue plan, which subsequently failed to pass because some members of US Congress objected to the use of such a massive amount of tax payers' money being spent to bail out Wall Street investment bankers who some people may have believed could be one of the causes of the GFC. By September and October of 2008, people began investing heavily in gold, bonds and US dollar or Euro currency as it was considered a safer alternative to the ailing housing or stock market sectors.
As GFC has been dragging one country after another, world leaders and the economists of the West are in great quandary about the future of the much-talked about and much-appreciated capitalism that offered no clear solution. The ideological bankruptcy of the leaders of the West is being exuded off and on. They adopt the policy of cutting welfare schemes of the elderly people in the guise of austerity measures that makes the lives of many people wretched. This flight from reality is a sign of the utter convalescence felt by world leaders in face of their failure to find a solution to the global economic paralysis stemming from the GFC. From their perceptions, of course, any such solution must be well-matched with preserving the present "neo-liberal" world economic order, which since the 1980s has concentrated untold wealth in the hands of the miniscule minority that they represent, while the vast majority of the world's population sinks abysmally into impoverished hopelessness. These unpleasant economic conditions raise the question about the future of capitalism.
For the survival of capitalism, continuous growth is sine qua non. A system that requires growth cannot last for ever on this competitive planet that is defined by ecological and social limits. At this moment, we are in the midst of a crisis which is calling into question the future of this system. Now is a perfect opportunity to envision a new way of living in the world that can meet human needs while also respecting the needs of the planet. It is time to build this new world. The present economic growth scenarios, especially in the big capitalistic countries, are frustrating.
On the contrary, growth rates in some emerging and developing countries are economically encouraging. Some countries are expecting negative growth in 2015 and onward that signals about the sustainability of capitalism. The year 2015 will be extremely challenging for those still mired in third dimensional economies but for the rest, new opportunities around everywhere will turn.
Fraudulent, market-distorting practices in the stock markets in some capitalistic countries may be seen as just another manifestation of a broader climate of manipulation now saturating all asset markets. The best publicised case of such market rigging has been the LIBOR interest rate fixing scandal, exposed in 2012. On top of this, now come allegations - which have thus far received little media coverage - that the vast foreign exchange market (with daily turn over of more than $4.5 trillion) whose epicentre is once again London, is also subject to widespread distortion of exchange rate benchmarks by market traders. All this reinforces the growing sense that virtually all international financial markets are by now effectively rigged - and that the often criminal practices involved are tacitly sanctioned, indeed orchestrated, by the governments of the industrialised world under the banner of capitalism.
It is worth mentioning here that allowing such an essentially fraudulent market climate to develop is extremely hazardous for those who believe that the world economy is governed by more or less free markets and a level playing field for all. For, once market players perceive that markets have become institutionally warped and corrupt arenas where a privileged few with inside information can make vast profits at the expense of the mass of ordinary investors, the latter are bound to start leaving the casino in droves - if not burning it down. At the same time it will become harder and harder to convince the public at large that they should make huge sacrifices to keep the system buoyant. People blame the capitalism system that allows, directly or indirectly, the corrupt and fraudulent practices in stock market.
GFC and world economic crisis have created untold miseries to the people of the developed and underdeveloped economies. Some EU countries are having 20 to 25 per cent unemployment rate and some countries are trying to cope with the situation by bail outs, fiscal policies and monetary policies but have not succeeded fully and are still struggling.
After the global turmoil arose from the GFC, it seemed to many economists as though the capitalist era was passing away -- not swiftly, but inexorably. A new economic paradigm, the "Collaborative Commons" has been emerging that will transmute and change the course of life. We are already witnessing the emergence of an amalgamate economy, part capitalist market and part Collaborative Commons. The two economic systems often work in tandem and sometimes contest with each other. Sometimes they are finding synergies along each other's parameters, where they can add value to each other, while benefiting themselves. At other times, they are deeply adversarial, each attempting to absorb or replace the other.
At the heart of capitalism there lies a contradiction in the driving mechanism that has propelled it upward to commanding heights: the inherent dynamism of competitive markets that drives productivity up and marginal costs down, enabling businesses to reduce the price of their goods and services in order to win over consumers and market share. While economists have always welcomed a reduction in marginal cost, they never anticipated the possibility of a technological revolution that might bring marginal costs to near-zero, making goods and services priceless, nearly free, and abundant, and no longer subject to market forces.
Capitalism has been distorted, manipulated and degraded by the too-greedy-to-fail banks and financial institutions and their co-conspirators who now care only about making short-term profits for a narrow base of shareholders and insiders, with no care for the general people of a country as a whole. So today Wall Street's giant banks are back making huge profits, only for insiders and shareholders. A Financial Times article cheered: "Wall Street returns to era of big profits." But at what cost? Who's gaining? Flat lining payroll and wages prevail for three decades. That's how the new pseudo-capitalism works-- with 93 per cent of short-term profits to the top 1 per cent.
Capitalism has been the leading economic system in the Western world for four hundred years. It has produced more wealth than all the prior economic systems put together. It has also lifted hundreds of millions out of poverty, educated billions and may one day cure cancer. But nothing, not even the best thing ever, lasts for ever. Paraphernalia come to pass. Things change. Systems work until they don't stop working. The uncontrollable GFC, the slow and negative growth, the widening of income inequality between the rich and the poor are great challenges for capitalism in many powerful countries in the capitalist bloc. Now the question genuinely comes to the mind of the economists: how long will capitalism be able to tackle the innumerable problems faced by billions of people and how long will it survive?
 The writer is the CFO of a private group of companies.
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