Global Financial Crises and the government response

A crisis not only presents an immediate challenge that has to be faced, it also provides an opportunity to address long-term problems when people are willing to reconsider established conventions. The present economic crises do not, call for a "new capitalism," but they do demand a new understanding of older ideas, many of which have been sadly neglected. What is also needed is a clearheaded perception of how different governments and institutions actually —going beyond short-term solutions and contribute to producing a more decent economic world.
Real economic efficiency implies including all resources that affect sustainable human well-being in the allocation system, not just marketed goods and services. Our current market allocation system excludes most non-marketed natural and social capital assets and services that are critical contributors to human well-being. This is why the present crisis also makes it important to face the neglected long-term issues like conservation of the environment and national health care, as well as the need for public transport, which has been very badly neglected in the last few decades and is also so far sidelined
Economic affordability is, of course, an issue, but as the example of the Indian state of Kerala shows, it is possible to have state-guaranteed health care for all at relatively little cost. Since the Chinese dropped universal health insurance in 1979, Kerala—which continues to have it—has very substantially overtaken China in average life expectancy and in indicators such as infant mortality, despite having a much lower level of per capita income. So there are opportunities for poor countries as well.
But the largest challenges face the United States, which already has the highest level of per capita expenditure on health among all countries in the world, but still has a relatively low achievement in health and has more than forty million people with no guarantee of health care. Part of the problem here is one of public attitude and understanding.
The role of government also needs to be reinvented. In addition to government's role in regulating and policing the private market economy, it has a significant role to play in expanding the "commons sector", that can propertize and manage non-marketed natural and social capital assets. It also has a major role as facilitator of societal development of a shared vision of what a sustainable and desirable future would look like.
The long term solution to the financial crisis is therefore to move beyond the "growth at all costs" economic model to a model that recognizes the real costs and benefits of growth. We can break our addiction to fossil fuels, over-consumption, and the current economic model and create a more sustainable and desirable future that focuses on quality of life rather than merely quantity of consumption.
It will not be easy; it will require a new vision, new measures, and new institutions. It will require a redesign of our entire society. But it is not a sacrifice of quality of life to break this addiction. Quite the contrary, it is a sacrifice not to.
As far country like India is concerned, it was delicately poised to face the global recession. And the fact that $5 billion worth of capital has flowed into India with the start of the current fiscal is a promising sign of the easing of the liquidity situation. The impact of the global economy on India , primarily on the demand side, is less than would otherwise be the case. But as long as on the sully side, there is productivity and domestic savings and the growth of capital and the growth of investment leading to the growth of capacity
Montek Singh Ahluwalia, the deputy chairman of the Indian planning commission revealed that India should be able to grow at 8-9% . “The focus is on savings whether we are investing enough, if there will be enough inflow of adequate foreign investment and whether domestic capital will be able to achieve the productivity gains in what we have to look at” said Singh. All known cases of high growth are not cases where just expand capital stock but also where you have high levels of productivity. He said that the country is on a strong wicket on many fronts and the return on capital will also be higher in economies like India, which are poised to grow faster than their western counterparts.
Globally we can not expect a robust growth but there will be growth in 2010-11. This puts an end to global uncertainty once confidence is restored global investors will look for returns. Since the West will grow slower, the return on capital will be higher in economics which will grow faster in India.
The world Bank in its Global Development Finance Report released recently has also projected an 8% GDP growth fro India in 2010, which will make it the fastest-growing economy trailed by China with 7% growth. The Bank revised the growth rate for the Indian economy for the current year to 5.1% from an earlier projection of 4%.
The financial sector reforms were on the agenda in the Indian economy and there is a view that because there has been a global financial crises, there should be rethinking on financial sector reforms. What the world crises shows is unthinking liberalization of the capital account and expansion of unregulated financial sector can be dangerous because it leads to a lot of leverage and it creates lot of activity in areas where there isn’t enough regulation. But that was the intention, India was always of the view that the financial sector must operate within regulations but within those there should have enough freedom. India has a well regulated system and should allow private sector banks to expand more freely. Once it has the regulations, competition among banks should be allowed. The country has allowed capital inflows but has not suggested a balanced system with some restrictions. There are lessons to be learnt that too many people are learning the wrong thing to stop every thing. The financially over liberalized economies are moving towards the center of the spectrum but was over controlled and have to move towards less control in the sense of letting more players participate.
It’s just not possible for trillions of dollars to disappear. Money does not disappear. The amount of money is fixed, more or less. Yes, it’s possible for dishonest governments to churn out more bills, but in major industrial countries that only happens to a limited extent, because it reduces the purchasing power of each dollar of savings, and rich people don’t like that. The money didn’t just evaporate. It went to government pension funds, to the Pentagon, to the arms dealers, to the bank executives as bonuses for the record numbers of fraudulent loans handed out by their underlings, to the owners of sweatshops in distant lands, and above all it went to the rentiers, the ultimate lenders of money.
Lending is far better than working for a living – that’s why if we buy a house for Rs15,00,000, we’re expected to pay that money back to the bank, along with Rs5,00,000 in interest. The only people for whom money “disappeared” were the middle class.
In the meantime, there must be survival strategies for those whose income has half the spending power of our parents’, for those of us who bleed ourselves dry trying to educate children who will be climbing over garbage dumps in later decades.
In fact no government, in the perspective of global financial crises, is telling or informing its people to get rid of all debts, including such things as student loans, credit-card accounts, mortgages, and car payments. As time goes by, there will be less and less opportunity to pay off such debts. Or Don’t be involved in the stock market or any similar method of investment.
Investigate the reputation of your bank. Consider switching to a safer currency, if there still is such a thing. Swiss francs or Euros are probably the best bet. Don’t just go for currencies that are rising rapidly
Start reducing your possessions, and consider a more nomadic way of life. Most westerners own such vast quantities of junk that moving from one house to another is like re-living D-Day. We are convinced by advertisers that happiness consists in owning one of everything, but we are buried in our possessions. The problem there is that, even now, one cannot always count on the police when a dispute occurs, and people living in rural areas sometimes speak of forming their own vigilante squads. Vigilantism, however, is not only illegal but often just plain impractical. When a gang of outlaws moves in next door, as will happen in the coming anarchy, you may wish your assets had been more disposable. In the uncertain future, there could also be a dozen other reasons, not necessarily of so grim a nature, why you might want to be able to pack your bags fairly quickly.
The present savings will be cut in half one day. Money will be eroded by inflation, as goods become harder to make and harder to transport. Food, clothing, and countless household items, which even now are so cheap that we rarely bother to look at the sales slip, will not be so readily obtainable in the future.
Watch out for currency collapses, even if you live in a major industrial country. In the 1980s and 90s, especially in the wake of “free trade” agreements, money-market speculators moved in and forced the currencies of several nations to fall considerably vis-à-vis those of more-powerful countries. Remember the fate of the Mexican peso. Without a gold standard or fixed exchange rates, any form of money has only the spending power that the speculators allow.
That real wealth is in the head of a person. Even if your survival bunker has a thousand tools and weapons, your mental powers are more important. You don’t need a dozen books if you’ve already memorized them. Besides knowledge and wisdom, your head should also contain a modicum of courage, compassion, and all the other virtues we managed to forget.
Even though the Indian government has heavily responded to the global financial crises, but it needs to consider the aforementioned facts in its true letter and spirit, so as to justify the world over projections in the economic restoration.

Global financial crisis, shaking, shocking.

The financial meltdown has hit almost every corner of the earth and some indications are that it is only going to get worse. The recent International Labour Organisation (ILO) report has predicted a frightening scenario. 60 million more people could lose their jobs by the end of 2009. That means 60 millions families are going to lose their livelihoods with people remaining mired in poverty due to falling growth rates. For those who manage to keep a job, earnings and other conditions of employment will deteriorate. It can be said that through excessive trust in the markets, businesses that focused only on profits have collapsed.
Although it happened so suddenly, but it showed that those who knew everything, understood everything, and were confident in themselves were not correct. So (despite) expertise in understanding the financial world itself, it showed that we do not have the capacity to understand those cases. The big pillars of the financial system just collapsed, and that was not realized (even) by experts weeks ago. That was a shocking part of it; people were not aware of it.
In hindsight, some are saying that the reason is extreme greed, which led to the collapse or the marketplace has been used like a gambling casino. It's no longer business; it's gambling. Another irony in the situation is that the richest people lose lots and lots of their money and wealth, but the guys who had a billion dollars still have half a billion dollars left. And once things go back to normal, they can get a billion dollars again. But the 3 billion people at the bottom have been hit the hardest because they are losing their jobs, incomes and food now that the economy is slowing down, factories are closing, jobs are being
Allas! we forgot that the financial crisis was just not the only one in 2008, it was the year of food crisis and the year of energy crisis also, when oil prices went up to $150 (a barrel) and so on. And one crisis that continued not only in 2008 but long before is the environmental crisis.
So this is a combination of these crises which are no more separate crises. In a way, they are interlinked with some connections. The interlinked crises of food, finance and climate change illustrate the weaknesses of our current economic system.
The current financial meltdown is the result of under-regulated markets built on an ideology of free market capitalism and unlimited economic growth. The crises that gripped the globe resulting in the growing unemployment, poverty and hunger.The fundamental problem is that the underlying assumptions of this ideology are not consistent with what we now know about the real state of the world. The financial world is, in essence, a set of markers for goods, services, and risks in the real world and when those markers are allowed to deviate too far from reality, "adjustments" must ultimately follow and crisis and panic can ensue.
We have to remember that material consumption and GDP are merely means to that end, not ends in themselves. We have to recognize, as both ancient wisdom and new psychological research tell us, that material consumption beyond real need can actually reduce well-being. We have to better understand what really does contribute to sustainable human well-being, and recognize the substantial contributions of natural and social capital, which are now the limiting factors in many countries. We have to be able to distinguish between real poverty in terms of low quality of life, and merely low monetary income.
The new model of development would be based clearly on the goal of sustainable human well-being. It would use measures of progress that clearly acknowledge this goal. It would acknowledge the importance of ecological sustainability, social fairness, and real economic efficiency. Ecological sustainability implies recognizing that natural and social capital are not infinitely substitutable for built and human capital, and that real biophysical limits exist to the expansion of the market economy.
Social fairness implies recognizing that the distribution of wealth is an important determinant of social capital and quality of life. The conventional model has bought into the assumption that the best way to improve welfare is through growth in marketed consumption as measured by GDP. This focus on growth has not improved overall societal welfare and explicit attention to distribution issues is sorely needed.
The agrarian crisis is largely seen to be history, supposedly vanquished by the rising prices of agricultural goods in world trade between 2002 and mid 2008, even though farmers' incomes continue to stagnate and cultivation is still barely viable in large parts of the developing world. Because of the volumes of manufacturing exports from Asia, there is still widespread perception of shift of manufacturing jobs from North to South -- even though manufacturing employment has declined in the developing world as a whole, has barely increased in most countries of Asia and has actually declined since 1997 in what is generally accepted to be the workshop of the world, China.
In a debate in London someone asked whether China and India, newly enriched by exploiting the globalization process, would use the current crisis as opportunity to ride through the global economic tsunami that threatens to engulf everyone else and emerge stronger than the US and Europe. Some people were even sharper in saying that China and India have benefited from the crises but it produced social crisis in Asia and that could be very severe if not treated properly.
The stark reality is that the developed world must, on the whole, consume less of the world's resources and reduce its contribution to global warming absolutely. This in turn has effects on income as well. It is not immediately clear why rich countries with falling populations necessarily need to increase their GDP, and why they should not focus instead on internal redistribution and changing lifestyles, which could in fact improve the quality of life of every citizen.
The current crises is due to the wrong policies that were hitherto pursued by the so-called dominant leaders led by the United States and its allies, whose aim was to serve the corporate military establishment instead of addressing the crises as a whole. Most of the efforts of these leaders were to bailout the banks and corporate that paid huge bonuses and incentives to its executive at the expense of the taxpayers and common people. This is because the capitalist and consumerist policies pursued by these nations relied heavily on these financial institutions, corporations and Stock Exchanges.
The world has been continuously deceived by theses leaders and we have repeatedly fallen into the same trap again and again. After the disastrous eight years of Bush administration, the world is looking forward to the Barack Obama, who might either be one of the highly sophisticated among these traps or an initial source of future change. The coming months and years will provide the answer.
The current crisis is an excellent -- even unique -- opportunity to bring about such shifts in socially created aspirations and material wants, and to reorganize economic life in the developed world to be less rapacious and more sustainable. But sadly, this message is not being heard at least among the major policy makers in the core capitalist countries. In the United States, even the relatively environment-friendly Obama administration simply talks about promoting "cleaner, greener technologies" rather than altering absurd and wasteful consumption patterns.
The present economic crises do not call for a "new capitalism," but they do demand a new understanding of older ideas.There is no question that current "Northern" standards of life cannot be sustained if they were made accessible to everyone on this planet. This means that future economic growth in the developing world has to involve more equitable and sensible patterns of consumption and production
The fallacy that economic growth can lead to improved human welfare underpins the global financial crisis. Now, we need to move beyond 'growth at all costs' and reorganize the economy based on the quality of life rather than quantity of consumption, We cannot solve the impending crises with the existing leadership that is part of the problem and is more interested in igniting new conflicts, instead of solving the existing financial and existential issues that are haunting the humanity as a whole.
While criticizing the current leadership and their short sighted and arrogant policies, taking into consideration the dire consequences that we are about to face in the coming years, it is important to understand and feel the heat and see that what kind of policies can be implemented to overcome the serious challenges, because personal efforts are not enough to handle the ongoing worsening conditions and there must be government intervention to truly jump the economy forward, especially as the government exists for the people and not the other way around!
1. With the global financial collapse and the ensuing bankruptcy and shut down of many corporations and companies that resulted in job cuts and unemployment, people face growing poverty, hunger and homelessness. This consecutively results in financial and economic breakdown, social evils, crimes, chaos and civil wars. Although some major countries are are facing severe pain the country like India has just escaped from the bigger collapse by having better controlling of public distribution system and other essential and life sustaining services. But it must be ensured to have smooth distribution of basic essential items including food to all sections of the society and a check over growing population.
2. With the collapse of the neoliberal economic and financial system the country leadership must formulate and implement alternative sustainable economic policies that will ensure equitable distribution of the limited and depleting resources and ensuring environmentally compliant, agrarian economic system as a replacement to exploitative, consumerist and polluted capitalist system. This includes conversion from a financial to a humanistic economy and implementing an interest free banking system like in some muslim counties including Iran and Bangladesh. The localization of economies by building self sustaining cooperatives and ensuring self sufficiency at the grassroots level is one of the basic ingredients to ride over the crises and for building a sustainable society.
3. The great disparities and injustice between nations and resulting exploitation and oppressions has led to the conflicts and social chaos. The depleting resources and the financial collapse will further aggravate these crises. In order to prevent future conflicts and to bring justice to all nations and all strata of the society, we need a global leadership that is above narrow confines and ensure justice for all especially the oppressed and the downtrodden. Resistance, mass movements and civil disobedience have to be organized against the existing establishment representing the capitalist- corporate-military axis and their neoliberal capitalist policies. Resistance should also be organized against the arrogant imperialist foreign policies of these nations pursue and the resulting exploitation, injustice and brutality that is imposed on the people of other nations by them.
4. Addressing and implementing policies to counter the threat of climate change that has resulted in huge natural upheavals, melting glaciers, rising sea level, extinction of variety of species and depleting agricultural yield. Many of the Indian cities have banned the use of polythene which although is a late decision but will prove as a good move in years to come.