The credit crunch has demonstrated the problems inherent in capitalism
The credit crunch plunged us into a global economic downturn - this highlights the serious vulnerabilities and inherent flaws that exist within capitalist systems.
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Credit Bubbles that Occur Within Capitalism Are Unstable
Capitalism does not lead to linear growth - the very nature of production for privat profit with individuals, entreprises and investors competing against one another leads to excessive and unnecessary waste of resources and excessive and foolish investment.
'Credit bubbles' and resultant credit crunches are not new and simply happen whenever productive economic sectors begin to undergo a slowdown resulting in falls in profits. Capitalists and investors attempt to overcome this by investing in areas that are less productive but provide better returns than other sectors, for example, gold and real estate.
What is different about this credit crunch is that it involved new ways of expanding credit beyond the productive capacity of capitalism. Traditional bank lending gave way to loans that were converted into new forms of bonds and securities that were sold onto all and sundry as ‘safe and profitable’ investments. And bets and hedges called derivatives were also sold and bought on top of them. The global credit market (including loans, bonds and derivatives) expanded from three times world GDP to 12 times global GDP in just ten years[[http://www.marxist.com/credit-crunch-one-year-on.htm]].
In effect, the 'credit bubble' - or, according to Karl Marx, 'the expansion of fictitious capital' occurred due to an unsustainable expansion of fictitious capital which failed to be replaced by real capital in time.
Capitalism Results in the Erosion of Societal and Individual Health and Happiness
Today's system of global capitalism is leading to an increase in poverty, the rise of inequality betwen rich and poor, global warming, poor environmental repurcussions, political apathy and eroding democracy as we move further into democracy which represents our corporations rather than our people in existing liberal democracies.
Global capitalism also results in major moral, spiritual and intellectual erosion due to the excessive wastage, competition and materialism that is inherent in capitalist systems.
Socialism Solves the Inherent Flaws of the Capitalist System
The problems inherent in capitalism can be solved and our society can transform itself. We need to become a truly egalitarian and democratic society.
Socialism can create a society where everyone is equally wealthy and truly has the same opportunities. This will make us happier, and make our society fairer. We would have self-governing communes and be free at last!
"Workers of the world unite; you have nothing to lose but your chains!" [[Karl Marx, The Communist Manifesto]]
Specific Failure Within the Banking System
We need to return to a seperation of commercial banking from investment banking, as was legislated in the US under the 1933 Glass-Steagall Act, which was scrapped under President Clinton in the 1990s.[[http://www.ft.com/cms/s/0/9a8f3b22-1191-11de-87b1-0000779fd2ac.html?nclick_check=1]]
It is dangerous to allow banks to get into a position where they can be shut down by pursuing exciting, but high risk investment banking activities. The rationale for this seperation is that it was a commercial banking crisis that poses the systemic risk. Investment banks should be left alone from state interference and left to the influence of the market.[[http://www.ft.com/cms/s/0/9a8f3b22-1191-11de-87b1-0000779fd2ac.html?nclick_check=1]]
"This leaves a much more limited, and practicable, but still absolutely essential, role for bank supervision and regulation: namely, to ensure that the core commercial banking system is thoroughly sound and adequately capitalised at all times."[[http://www.ft.com/cms/s/0/9a8f3b22-1191-11de-87b1-0000779fd2ac.html?nclick_check=1]]
Capitalism is not without its Problems but it is Clearly the Best Known Economic System
Capitalism is not without its busts and booms - this is the nature of capitalism, but we need to learn to live with these economic ups and downs as it is vastly superior to any known alternatives, for example socialism, communism, or feudalism. The credit crunch is frustrating and has angered many people because it is their wealth and living standards that are being chipped at, but they should not turn against capitalism and turn to anarchy or socialism - this is not the way forward. We have to address the problem: in this case, it is a solveable problem, thankfully, and move on. The market will eventually correct itself and we will see a rise in living standards again soon enough.
Social Democracy. A system in which you take elements of capitalism/communism, and combine them for the best result. You can climb the "ladder" which capitalists talk about all the time, but the lower rings of said hypothetical ladder aren't slippery and broken. They are in good repair, because those from the higher rings are repairing them.
Look at the Past, didn't we get through it fine?
Sure, Capitalist Economies has its flaws, nothing is perfect. But there must be a reason why most countries have adopted a mainly Capitalist theory for their economy, it's because it is the one that works best. It is not a solution to everyone and everything but its covers more than the other economic theories. Capitalism works with its bust and booms, and we have been through that cycle several times and yet come back, this proves that the crunch is only a phase. Moving towards Socialism or any other may seem to be the solution at the moment, but only because we are in the crunch whilst we are in a Capitalist society, who is to know if moving to another stand might not result in the same or worse crunch?
And most societies today are not based purely on Capitalism, most economies are mixed with government involvement in the businesses that private individuals and organisations don't find profitable, for example, free healthcare, especially in more developed countries.
I personally do not agree in the sense that everyone should be equally paid in communism. Money is inevitably an incentive for people to work harder, as shallow as that sounds, that is human nature , and motivation is needed for any country to progress economically and then therefore in development of the whole country's superstructure. However, i do agree in allowing everyone to have the equal chance of education, what they turn out to be will determine what they earn, what sort of gratification they get. there should be noone to blame except oneself when it comes to that if education was made equal to everyone.
What do you think?