World Economic and Financial Crises

Joseph Stiglitz, the eminent economist, Nobel Laureate and Professor of Columbia University recently said that the world is going into the worst economic crisis since the Great Depression.

Credit is contracting, output is falling, unemployment is increasing and most asset values are falling.

It is likely not only to be a long downturn, but also a deep one.

The crisis was predictable and predicted.

But unfortunately, mainstream economists, politicians and policy makers ignored the warnings.

We have much to learn from those failures, as well as those of the economy itself. 

The summit on Financial Markets and the World Economy was held at the National Building Museum in Washington during November 2008 and ended with subdued expectations.

It was Nicolas Sarkozy, President of France who pressed George W. Bush to have the summit by inviting 20 Heads of State including India represented by Dr. Manmohan Singh, Prime Minister of India.

The summit ended with a formal declaration of commitment to certain basic principles and an ambitious plan to reform the financial regulatory system and institutions such as the IMF and the World Bank.

It is the most important economic meeting to find a solution to the global economic crisis faced by all countries of the world.

Everyone knows that it is not that easy to find a solution to bring back the world economy on the rail.

The economists from all over the world are scratching their heads in order to search for a solution.

Someone said that it is a great challenge for the economists and politicians.

The common people feel the pinch of the financial crisis in all walks of life.

Every thing is costly.

The stock market is towards the downturn.

Bailout money is released by many Governments.

But the bailout is not happening.

However the summit gave an opportunity to offer a genuine dialogue between major developed and emerging countries.

At home the Union Finance Minister Mr. P. Chidambaram appealed to various sections of industry to reduce prices to induce consumer demand.

Due to the sky rocketing of prices, the real estate companies made huge profits in the past.

The common man is cutting down his desire to purchase consume goods.

Such an action in fact, affects the production and also the employment.

Everyday we read in newspapers thousands of jobs are being cut in various industries.

One interesting thing we observe nowadays is that the crude price has come down to less than $50 from $150 per barrel some months ago in 2008.

This decline in price did not bring down the prices of petrol and diesel we buy from our fuel stations still.

Governments should press the companies to go for less profit for the time being so that the prices will come down and it will increase the demand for things resulting in more production by employing more people.

It has a chain reaction to bail out the current economic and financial crises.

Every Indian is worried about their financial management.

The stock market is on the decline and one does not know when the banks become bankrupt.

The Government of India has announced certain plans through RBI to bail out Indian industries and unemployment.

Considerable amount of time is spent on the market strategy and financial management.

No one knows how these attempts are going to solve the national financial crisis.

The common man is paying more money for every item he bus including food.

Still he does not have much voice and participation in the policies of Government.

Day to day activities is going on in every sphere without feeling the pinch to a larger extent.

People try to adjust their budget according to their earnings.

Festivals are being celebrated as usual in spite of the so called financial crisis.

Car prices have come down slightly to promote more sales in the market.

Mr. Chidambaram when has the Finance Minister (now Home Minister) insisted on this point of reducing the prices of consumer goods to increase the sale and run the company with less profit and keep up the production without laying off the staff.

Advanced countries like the US, UK, and others are trying their techniques to bail out their industries and companies.

In fact every country is making its own ways for solving the recession.

Economists come out with models for implementation without knowing the outcome.

Political parties differ in their views to adopt such models.

Of course, precautions have to be taken before blindly adopting those models.

Because of globalization, countries are interlinked and interdependent.

If one country’s economic situation is affected it is spread to other countries too.

Of course it is contagious in nature like Bird flu or HIV/AIDS.

Unless the root cause for such crises is found out it will be difficult to tackle the problem of global financial and economic crises.

Trades are being affected due to less demand.

Someone says that trust has become a rare commodity nowadays.

Free market capitalism is ruling the globe because of the globalization.

Market, marketing and trade are the essential components in economic development of any country.

When trust is lost because of obvious reasons, profits are privatized and losses are socialized.

Therefore we expect that the globalization cannot accept such a trustless trade.

Everyone wants to make money at the cost of others.

Greediness kills others and brings down the upward movement of financial trend.

But unfortunately, today we find a trend that affects the nook and corner of the world.

No one knows what will happen in future.

No bright future is predicted, but to maintain the status quo bailouts have been made by pumping billions of dollars into various industries.

Dr. Prabhudev Konana, the distinguished Teaching Professor at the University of Texas, Austin (USA) says:

“Yet financial markets are required for raising capital, creating jobs, and keeping the entrepreneurship and innovation cycle running. We need to bring back the ‘real’ trust with greater oversight and accountability”

Who has to do these?

Every Nation in the world needs to seriously think on these aspects to make the world a pleasant place to live for billions of people.