The Spontaneous Order of the Neo-Liberalism and the Global Financial Crisis
17 Pages Posted: 4 Apr 2010
Date Written: March 31, 2010
This paper tried to figure out the relation between the Neo-liberalism (with the spontaneous order as its core) and the recent global financial crisis which occurred at the end of 2007 and still on the go until now. Hence, the paper concludes that the Capitalism itself can not avoid or cure its own disease, which means another theory as Marxism is needed. This paper concentrates on the following issues:
1. The spontaneous order includes regulations, rules, systems, etc. which were spontaneous results of many individual interests in the society. Therefore, if the market can work under its spontaneous order, it is believed that there is no crisis at all. However, if crisis can happen (which is the results of intervening the spontaneous order) then the market can fix it itself.
2. Since the 1970s, the spontaneous order of the Neo-liberalism was a success in solving the relation between government and the market, and with the motto ‘more market, less government’ it truly did bring rapid development to the capitalist economies. After that, Neo-liberalism became more and more popular and was applied in many capitalist countries.
3. The liberalization in the US banking and financial market led to the rapid grow of its sub-mortgage market in the period of 2004-2007. The result was, when the ‘real estate bubble’ busted, lots of banks and borrowing institutions were bankrupted. Following that, big banks and financial groups were dragged into a ‘tornado’ of bankrupting, forcedly merged and acquisition, or asking help from the government. This ‘tornado’ was not stop at the US but also expand to the entire World, impacts on many aspects of the World economy. Although the ‘economic subsidies’ and ‘bailout packs’ which worth hundreds of billion of US Dollar was implemented by many Governments, the recovering process is still slow and unclear.
4. This crisis showed that the Capitalism itself can not avoid the crisis, and also can not cure the crisis effectively as its spontaneous order theory claimed. That means another theory, another resolution or another policy is needed to fix the problem. This is the time for the rise of the Marxism.
Keywords: Capitalism, Neo-Liberalism, Spontaneous Order, Hayek, Financial Crisis, Subprime Mortgage, Financial Liberalization
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