This document discusses economic liberalism and lessons from the recent global financial crisis. It begins by outlining Adam Smith's theory of free market economics and the role of limited government intervention. It then discusses how governments have historically intervened more than envisioned in the theories, such as to regulate large corporations. The global financial crisis prompted massive government bailouts and stimulus packages in nations like the US and Europe to rescue their economies, demonstrating that responsible governments must intervene when free markets fail to sustain economic health. The crisis showed that traditional policy tools were insufficient, requiring robust non-routine government action to prevent economic collapse.
What is Political Economy?
Different types of Economic Systems and its influence on planning process
Capitalism and Capitalist Planning Model
Communism and Communist Planning Model
Socialism and Socialist Planning Model
Types of Economies content slideshow. Designed for the Economic A level qualification. Can be used in revision and in class.
Subtopics
Free Market Economies
Command Economies
Mixed Economies
Economics in One Lesson: Wars, Governments, Price Controls and the Boom-Bust ...Graham Wright
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Based on the Henry Hazlitt book, this presentation is an introduction to applied economics. Hazlitt's lesson, to consider what is unseen as well as what is seen, is applied to various situations: broken windows, wars and governments.
The market process for allocating resources is introduced, and the effects of price controls, such as the minimum wage law, on resource allocation is examined.
Finally, the One Lesson and the theory of price controls is applied to the phenomenon of the boom-bust cycle, which is explained as a necessary consequence of government manipulation of interest rates.
What is Political Economy?
Different types of Economic Systems and its influence on planning process
Capitalism and Capitalist Planning Model
Communism and Communist Planning Model
Socialism and Socialist Planning Model
Types of Economies content slideshow. Designed for the Economic A level qualification. Can be used in revision and in class.
Subtopics
Free Market Economies
Command Economies
Mixed Economies
Economics in One Lesson: Wars, Governments, Price Controls and the Boom-Bust ...Graham Wright
Â
Based on the Henry Hazlitt book, this presentation is an introduction to applied economics. Hazlitt's lesson, to consider what is unseen as well as what is seen, is applied to various situations: broken windows, wars and governments.
The market process for allocating resources is introduced, and the effects of price controls, such as the minimum wage law, on resource allocation is examined.
Finally, the One Lesson and the theory of price controls is applied to the phenomenon of the boom-bust cycle, which is explained as a necessary consequence of government manipulation of interest rates.
Developmental state and africa elly series 2013.Should Africa Learn from Asia...Elly Twineyo Kamugisha
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Is Africa currently in the developmental stage? Is it on its way to economic success and ultimately development and liberal democracy?
Does the role of the state in the development of East Asian countries offer good examples for Africa?
Is the state in developed countries supporting or subsiding key private companies in their economies?
Developmental state and africa elly series 2013.Should Africa Learn from Asia...Elly Twineyo Kamugisha
Â
Is Africa currently in the developmental stage? Is it on its way to economic success and ultimately development and liberal democracy?
Does the role of the state in the development of East Asian countries offer good examples for Africa?
Is the state in developed countries supporting or subsiding key private companies in their economies?
The presentation is on neoliberalism in international relations. The emergence of neoliberalism and convergence and difference of neoliberalism and structural realism as well as barriers to international cooperation is presented.
Economic Systems Essay
Supply And Demand Essay
Macroeconomics Essay
Economics Essay
What is Economics? Essay
Economic Growth Essay
Economics Reflection
Essay on History of Economics
Document #1 History of the Economic Systems and TheoriesCDustiBuckner14
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Document #1: History of the Economic Systems and Theories
Capitalism
Capitalism is an economic system that emphasizes private ownership of the factors of
production, freedom of choice, and individual incentives. These freedoms and
incentives apply to workers, investors, consumers, and business owners. In pure
capitalism, the government does not interfere with the economyâthe wages of workers,
the prices of goods, what producers can make, the ways that businesses make or sell
their goods and services, or any other regulations. Capitalism assumes that the best
way to serve society is to let people produce, sell, and buy as they wish.
The goal of capitalism is to create what is called a free market. In economic terms, a
market is not literally just a market like a grocery store. A market or marketplace is
wherever all sorts of goods and services can be sold and bought. In a free market or
free enterprise economy like that under capitalism, the government places no limits on
the freedom of buyers and sellers to make their economic decisions.
Origins of Capitalism
The basic theories about capitalism and free trade come from Adam Smith. Smith was a
Scottish philosopher and economist who lived in the 1700s. In his famous book The
Wealth of Nations, Smith suggested the government take a laissez-faire approach to the
economy. Laissez-faire is a French term meaning âto let alone.â Smith thought the
forces of the marketplace would act as an âinvisible handâ guiding economic choices for
the best possible results.
Competition plays a key role in a free-enterprise or free-market economy because
sellers compete for resources to produce goods and services at the most reasonable
price. If they are successful, they make more money. At the same time, consumers
compete over limited products to buy what they want and need. Finally, these same
consumers, now in their role as workers, compete to sell their skills and labor for the
best wages or salaries they can get.
Pure capitalism has five characteristics: private ownership and control of property and
economic resources, free enterprise, competition, freedom of choice, and the possibility
of profits.
Free Enterprise in the United States
A true and total capitalist system does not exist in reality. The United States, however, is
a leading example of a capitalist system in which the government plays a role. Our
society is deeply rooted in the value of individual initiativeâthat each person knows
what is best for himself or herself. We also respect the rights of all persons to own
private property. Finally, our society recognizes individual freedom, including the
freedom to make economic choices. However, because the U.S. government also
regulates many aspects of the economy, it does not have a purely capitalistic economy.
Mixed Economies
Economists describe the economies in the United States and many other nations as
mixed economies. Mixed economies combine elements of capitalism and socialism.
Mexico is ano ...
Rodrik_Feasible_Globalizations
FEASIBLE GLOBALIZATIONS
Dani Rodrik1
Harvard University
July 2002
Introduction
We want economic integration to help boost living standards. We want democratic
politics so that public policy decisions are made by those that are directly affected by them (or
their representatives). And we want self-determination, which comes with the nation-state. This
paper argues that we cannot have all three things simultaneously. The political trilemma of the
global economy is that the nation-state system, democratic politics, and full economic
integration are mutually incompatible. We can have at most two out of the three. It follows that
the direction in which we seem to be headedâglobal markets without global governanceâis
unsustainable.
The alternative is a renewed âBretton-Woods compromise:â preserving some limits on
integration, as built into the original Bretton Woods arrangements, along with some more global
rules to handle the integration that can be achieved. Those who would make a different choiceâ
toward tighter economic integrationâmust face up to the corollary: either tighter world
government or less democracy.
During the first four decades following the close of the Second World War, international
policy makers had kept their ambitions in check. They pursued a limited form of
internationalization of their economies, leaving lots of room for national economic management.
Successive rounds of multilateral trade negotiations made great strides, but focused only on the
most egregious of the barriers at the border and excluded large chunks of the economy
1 I am grateful to Michael Weinstein for very helpful suggestions.
2
(agriculture, services, âsensitiveâ manufactures such as garments). In capital markets,
restrictions on currency transactions and financial flows remained the norm rather than the
exception. This Bretton Woods/GATT regime was successful because its architects subjugated
international economic integration to the needs and demands of national economic management
and of democratic politics.
This strategy changed drastically during the last two decades. Global policy is now
driven by an aggressive agenda of âdeepâ integrationâelimination of all barriers to trade and
capital flows wherever those barriers may be found. The results have been problematic--in terms
of both economic performance (relative to the earlier post-war decades) and political legitimacy.
The simple reason is that âdeepâ economic integration is unattainable in a context where nation
states and democratic politics still exert considerable force.
The title of this essay conveys therefore two ideas. First, there are inherent limitations to
how far we can push global economic integration. It is neither feasible nor desirable to
maximize what Keynes called âeconomic entanglements betw ...
The fourth edition of our annual State of Power report, coinciding with the international meeting in Switzerland of what Susan George calls âthe Davos classâ. This series seeks to examine different dimensions of power, unmask the key holders of power in our globalised world, and identify sources of transformative counter-power.
How did Neoclassical economists rationalize a policy of laissez fair.pdfamitseesldh
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How did Neoclassical economists rationalize a policy of laissez faire with respect to the potential
intervention into a market economy by government? Why do modern economists, on the other
hand, acknowledge a role for government.
A well-structured answer will include:
Solution
Ans :
In broad terms, there are three kinds of economic policies. The first is government ownership, or
socialism, where the government directly owns the means of production. The second is
government regulation, or interventionism, where the government leaves production to the
private sector but tries to shape market outcomes with subsidies, taxes, licensing, price and
quantity restrictions, standards of quality, safety, and health, non-waivable worker and consumer
rights, and other measures. The third is the free market, or laissez-faire, where private property
rights and freedom of contract alone provide the framework for interaction between firms,
consumers, and workers. The relationship between libertarianism and laissez-faire is a simple
one: laissez-faire is the libertarian position on economic policy. While most who use the
libertarian label admit exceptions, even the most moderate use laissez-faire as a benchmark.
Different economic perspectives emphasize specific elements of capitalism in their preferred
definition. Laissez-faire and liberal economists emphasize the degree to which government does
not have control over markets and the importance of property rights.
Classical economics can trace its roots to Adam Smith in 1776. In The Wealth of Nations Adam
Smith presented a comprehensive analysis of economic phenomena based on the notions of free
markets and actions guided by individual self interests in a laissez faire environment. This work
by Smith was motivated in large part as a critique of the existing merchantilist system.
Under mercantilism the ruling aristocracy directed economic activity with the primary goal of
benefiting the ruling aristocracy. The merchantilist view was that the wealth of a nation was
based on the wealth of the ruling aristocracy. Smith argued, quite convincingly, that the wealth
of a nation was actually based on the productivity of resources, which was best achieved if the
producers, consumers, and resource owners were left to their own \"selfish\" actions.
Economists also applied this classical framework to macroeconomic issues, especially
unemployment, economic growth, and business-cycle stability. With this application a
comprehensive theory of macroeconomics was developed that offered an explanation for
macroeconomic phenomena and provided recommendations for government policies.
The classical study of macroeconomics emerged from a set of axioms and assumptions that were
used for all economic analysis, such as wants and needs are unlimited, resources are limited,
people are motivated by self interest, and more is preferred to less. However, three particular
assumptions proved most important to the study of macroeconomic phenom.
The Impact of International Businesses in a Global Economy: An Interdisciplin...IOSR Journals
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This study is an analysis of the impact of international businesses in the world economy. It examined the effect of globalization in the economic growth of international businesses and the world economy; and the organizations that act as alliances in international business, such as the World Trade Organization and the International Monetary Fund. The study observed that while some countries may be favoured by particular changes in international business, others may be adversely affected. This does not mean that international business does not have unfavorable effects. Major changes in international business will also produce major adjustments. The process of adjustments may be a gainful one. The study concludes that in spite of the national economic policies of each country, politics and law play important role in international business, which does not tend to restrict its views to the interest of one country, but it tries to analyze the different national interests which are relevant to the national level of decision-making.
how can i use my minded pi coins I need some funds.DOT TECH
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If you are interested in selling your pi coins, i have a verified pi merchant, who buys pi coins and resell them to exchanges looking forward to hold till mainnet launch.
Because the core team has announced that pi network will not be doing any pre-sale. The only way exchanges like huobi, bitmart and hotbit can get pi is by buying from miners.
Now a merchant stands in between these exchanges and the miners. As a link to make transactions smooth. Because right now in the enclosed mainnet you can't sell pi coins your self. You need the help of a merchant,
i will leave the telegram contact of my personal pi merchant below. đ I and my friends has traded more than 3000pi coins with him successfully.
@Pi_vendor_247
what is the best method to sell pi coins in 2024DOT TECH
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The best way to sell your pi coins safely is trading with an exchange..but since pi is not launched in any exchange, and second option is through a VERIFIED pi merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and pioneers and resell them to Investors looking forward to hold massive amounts before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade pi coins with.
@Pi_vendor_247
how to sell pi coins in all Africa Countries.DOT TECH
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Yes. You can sell your pi network for other cryptocurrencies like Bitcoin, usdt , Ethereum and other currencies And this is done easily with the help from a pi merchant.
What is a pi merchant ?
Since pi is not launched yet in any exchange. The only way you can sell right now is through merchants.
A verified Pi merchant is someone who buys pi network coins from miners and resell them to investors looking forward to hold massive quantities of pi coins before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
The European Unemployment Puzzle: implications from population agingGRAPE
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We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
how can I sell pi coins after successfully completing KYCDOT TECH
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Pi coins is not launched yet in any exchange đ± this means it's not swappable, the current pi displaying on coin market cap is the iou version of pi. And you can learn all about that on my previous post.
RIGHT NOW THE ONLY WAYÂ you can sell pi coins is through verified pi merchants. A pi merchant is someone who buys pi coins and resell them to exchanges and crypto whales. Looking forward to hold massive quantities of pi coins before the mainnet launch.
This is because pi network is not doing any pre-sale or ico offerings, the only way to get my coins is from buying from miners. So a merchant facilitates the transactions between the miners and these exchanges holding pi.
I and my friends has sold more than 6000 pi coins successfully with this method. I will be happy to share the contact of my personal pi merchant. The one i trade with, if you have your own merchant you can trade with them. For those who are new.
Message: @Pi_vendor_247 on telegram.
I wouldn't advise you selling all percentage of the pi coins. Leave at least a before so its a win win during open mainnet. Have a nice day pioneers â„ïž
#kyc #mainnet #picoins #pi #sellpi #piwallet
#pinetwork
BYD SWOT Analysis and In-Depth Insights 2024.pptxmikemetalprod
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Indepth analysis of the BYD 2024
BYD (Build Your Dreams) is a Chinese automaker and battery manufacturer that has snowballed over the past two decades to become a significant player in electric vehicles and global clean energy technology.
This SWOT analysis examines BYD's strengths, weaknesses, opportunities, and threats as it competes in the fast-changing automotive and energy storage industries.
Founded in 1995 and headquartered in Shenzhen, BYD started as a battery company before expanding into automobiles in the early 2000s.
Initially manufacturing gasoline-powered vehicles, BYD focused on plug-in hybrid and fully electric vehicles, leveraging its expertise in battery technology.
Today, BYD is the worldâs largest electric vehicle manufacturer, delivering over 1.2 million electric cars globally. The company also produces electric buses, trucks, forklifts, and rail transit.
On the energy side, BYD is a major supplier of rechargeable batteries for cell phones, laptops, electric vehicles, and energy storage systems.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
how to swap pi coins to foreign currency withdrawable.DOT TECH
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As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
However, Pi Network has announced plans to launch its Testnet and Mainnet in the future, which may include listing Pi on exchanges.
The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
If you want to sell your pi coins, reach out to a pi vendor and sell them to anyone looking to sell pi coins from any country around the globe.
Below is the contact information for my personal pi vendor.
Telegram: @Pi_vendor_247
Even tho Pi network is not listed on any exchange yet.
Buying/Selling or investing in pi network coins is highly possible through the help of vendors. You can buy from vendors[ buy directly from the pi network miners and resell it]. I will leave the telegram contact of my personal vendor.
@Pi_vendor_247
US Economic Outlook - Being Decided - M Capital Group August 2021.pdfpchutichetpong
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The U.S. economy is continuing its impressive recovery from the COVID-19 pandemic and not slowing down despite re-occurring bumps. The U.S. savings rate reached its highest ever recorded level at 34% in April 2020 and Americans seem ready to spend. The sectors that had been hurt the most by the pandemic specifically reduced consumer spending, like retail, leisure, hospitality, and travel, are now experiencing massive growth in revenue and job openings.
Could this growth lead to a âRoaring Twentiesâ? As quickly as the U.S. economy contracted, experiencing a 9.1% drop in economic output relative to the business cycle in Q2 2020, the largest in recorded history, it has rebounded beyond expectations. This surprising growth seems to be fueled by the U.S. governmentâs aggressive fiscal and monetary policies, and an increase in consumer spending as mobility restrictions are lifted. Unemployment rates between June 2020 and June 2021 decreased by 5.2%, while the demand for labor is increasing, coupled with increasing wages to incentivize Americans to rejoin the labor force. Schools and businesses are expected to fully reopen soon. In parallel, vaccination rates across the country and the world continue to rise, with full vaccination rates of 50% and 14.8% respectively.
However, it is not completely smooth sailing from here. According to M Capital Group, the main risks that threaten the continued growth of the U.S. economy are inflation, unsettled trade relations, and another wave of Covid-19 mutations that could shut down the world again. Have we learned from the past year of COVID-19 and adapted our economy accordingly?
âIn order for the U.S. economy to continue growing, whether there is another wave or not, the U.S. needs to focus on diversifying supply chains, supporting business investment, and maintaining consumer spending,â says Grace Feeley, a research analyst at M Capital Group.
While the economic indicators are positive, the risks are coming closer to manifesting and threatening such growth. The new variants spreading throughout the world, Delta, Lambda, and Gamma, are vaccine-resistant and muddy the predictions made about the economy and health of the country. These variants bring back the feeling of uncertainty that has wreaked havoc not only on the stock market but the mindset of people around the world. MCG provides unique insight on how to mitigate these risks to possibly ensure a bright economic future.
how to sell pi coins on Bitmart crypto exchangeDOT TECH
Â
Yes. Pi network coins can be exchanged but not on bitmart exchange. Because pi network is still in the enclosed mainnet. The only way pioneers are able to trade pi coins is by reselling the pi coins to pi verified merchants.
A verified merchant is someone who buys pi network coins and resell it to exchanges looking forward to hold till mainnet launch.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
Economic liberalism and the management of the recent global crisis
1. Journal of Economics and Sustainable Development www.iiste.org
ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online)
Vol.3, No.7, 2012
Economic Liberalism and the Management of the Recent Global
Crisis: Lessons for Africa
Enefiok E. Essien, PhD
Faculty of Business Administration, University of Uyo, P. M. B. 1017 Uyo Akwa Ibom State, Nigeria.
* E-mail of the corresponding author: essieneneessien@yahoo.com
Abstract
The efficiency of the free market system in allocating resources and in regulating itself has become a received
doctrine in practically all capitalist nations. But the recent global financial crisis and the resultant government
interventions to salvage the economies of many nations have generated much debate on the continued relevance
of the free market and the wisdom of government âintrusionâ. This paper revisits the free market as propagated
by Adam Smith and examines the role of government in present day circumstances. Drawing from the African
experience, the paper concludes that the free market system and government involvement in the economy can
complement each other provided there is the capacity for determining the appropriate mix that would deliver the
maximum good to society.
Keywords: Economy, Management, Crisis, Liberalism, Free Market
1. Introduction
Over two hundred years ago Adam Smith (1776) wrote a book which triggered a discourse that has refused to
abate. The main thrust of his work was in defining an efficient system of exchange predicated on the selfish
pursuit of personal interest of the participants. The platform for the exchange was the âmarketâ, which served as
a clearing house wherein each participant got value that was commensurate with what he opted to part with. The
price of any product or service was thus the outcome of a balancing act between those who had what to offer (
supply) and those who wanted or needed what was offered, (demand). However, the balance was free to tilt in
favour of demand (where there was excess supply) or in favour of supply (where there was excess demand). The
direction and structure of these excesses influenced behaviour in consumption, production, and resource
allocation generally. Thus, in a free market economy, goods and services were to be allocated in line with the
interplay of demand, supply, and purchasing power. Allocation of resources was to be regarded as efficient if no
further allocation could improve the lot of any market participant without hurting that of another. And since
nobody would want to produce what could not be sold, the content and nature of production, including
innovativeness, were influenced by actual or perceived needs and preferences of the consumer. A profitable
market situation would, therefore, attract new investment, increased competition, and all things being equal,
reduced prices to the benefit of consumers. Where, on the other hand, there was a glut in the market, competition
would be stiff, inefficient firms would drop out and prices would fall. In all these, the interaction among market
participants was to be devoid of any overt or covert coercion and fraud.
For the market mechanism to function as efficiently as expected, certain conditions were to be met. Central to
the conditions was the non-interference of the government in the market. The role of the government was
confined to the maintenance of law and order, especially as it pertained to the enforcement of market-based
contracts and property rights (that is, the right to own, use, manage, and dispose of property as the owner deems
fit). Another condition, albeit implicit, was that market participants were to be more or less equally matched so
that no party could take undue advantage of the other.
Government and the free market
According to the proponents of the free market philosophy, the government should not get involved in
determining what is to be produced, or how and for whom it should be produced. Market forces should be
allowed to do the job, hence the term laissez- faire, meaning âleave it aloneâ. Government is, however, expected
to enforce such laws as would prevent theft, fraud, collusion, coercion and so on â all targeted at creating and
maintaining a fair playing ground for market participants. But the role of government has historically gone
beyond those confines, sometimes at the instance of the market participants themselves, an example being the
recent invitation of government action in the Nigerian textile industry.
Following the virtual collapse of the textile industry in Nigeria, due mainly to the dumping of cheap foreign-
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2. Journal of Economics and Sustainable Development www.iiste.org
ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online)
Vol.3, No.7, 2012
made textiles in the local market, manufacturers in the sector cried out for government intervention. The
argument is that free trade should be fair trade and that dumping is inconsistent with the free enterprise
philosophy. This has also been the experience even in some of the highly industrialised and pro-free-market
countries, including the United States of America. One widely reported instance is the appeal by United States
automotive manufacturers for government intervention to save them from stiff competition from foreign car
manufacturers, especially from Japan. The appeal resulted in governmentâs imposition of quota on foreign car
imports in 1981.
But government does not always wait to be invited before it intervenes in the economy. There are some areas,
both economic and social, where government is deemed to out-perform the market. These include defence and
justice. Others relate to market structure arising from the emergence of large corporations over time. Because of
their size and the resources they control, some large corporations have become so powerful as to defy regulation
by market forces. They operate on their own terms. It was the need to curb the excesses of such powerful
organisations that informed the promulgation of some of the earliest known market-related legislations in the
United States, such as the Sherman Act of 1840 and the Clayton Act of 1914, both of which were meant to
regulate conduct and behaviour in the free market economy. But, perhaps, the greatest government intervention
in that country was during the Wall Street triggered Great Depression of the 1930âs which literally tore the
economy apart. Faced with dwindling production, massive unemployment, loss of income, decline in
consumption, bank closures, stock market crash, and widespread poverty, President Roosevelt set aside the
doctrine of ârugged individualismâ of his predecessor, President Hoover, and responded swiftly with a long list
of legislations which were later collectively referred to as the New Deal. The series of interventions eased the
suffering of the masses and helped to restore confidence in the ailing banking sub-sector.
The lessons of the Great Depression and the New Deal are clear: a responsible government has no choice but to
intervene in the free market whenever the âinvisible handâ proves too feeble to sustain the health of the economy
or component(s) thereof. Ordinarily, governments seek to steer the affairs of the macro economy for purposes of
checking inflation, stabilizing the interest rate, generating employment, and promoting sustainable growth,
among other goals. They achieve these through the deployment of fiscal and monetary instruments and, also, by
direct manipulation (increase or reduction) of regulations. In a relatively stable environment, the measures tend
to achieve the purposes for which they were designed. However, when there are large scale systemic disruptions
in the market - when traditional instruments, especially regulations, are either too little or too late - and when
there is a real threat of an imminent collapse of the economy, government intervention assumes a more robust
and non-routine posture. Such was the case with the U.S. financial crisis of 2007 and beyond.
Protecting public interest: The bailout option
What has come to be variously described as economic meltdown or global financial crisis typifies major
distortions in the operation of the market mechanism in directing the economy. Commentators have traced the
roots to âliquidity shortfall in the United States banking system caused by the overvaluation of assetsâ
(Wikipedia, 2010, p.1). Wikipedia (2010) explains the problem further as follows:-
The immediate cause or trigger of the crisis was the bursting of the United States housing bubble which peaked
in approximately 2005â2006. Already-rising default rates on "subprime" and adjustable rate mortgages (ARM)
began to increase quickly thereafterâŠ.. Defaults and foreclosure activity increased dramatically as easy initial
terms expired, home prices failed to go up as anticipated, and ARM interest rates reset higher. (p.5)
The United States swiftly reacted to the situation in order to avert what seemed an iminent collapse of the
economy. Interestingly, that was not done by further liberalizing the market, but rather, by regulating it, in spite
of the ideological stance of the country. Affected European countries responded to the problem the way the
Americans did. Anderson, Cavanagh and Redman (2008) reported that United States spent $1.3 trillion while
European countries spent $2.8 trillion as at November 13, 2008 to bail out their ailing financial sectors. Tables 1
and 2 give a breakdown of the bailout in United States and Europe respectively.
Apart from the financial sector, manufacturing also benefited from the bailout. As at January 2009 the auto
industry in the United States, for instance, had received a total of $24.9 billion from the $700 billion bailout
fund. And, in addition to the financial stimulus, the industry agreed to embark on some government induced
reforms such as:
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ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online)
Vol.3, No.7, 2012
âą reduction in financial and non-financial benefits of Chief Executives,
âą issuance of warrants to government for stocks in their organisations,
âą speeding up the development of more efficient vehicles, and
âą generally repositioning the industry for greater efficiency and competitiveness
These steps served to forestall a systemic economic collapse in the affected countries, and prompted Dionne
(2010:4) to ponder if âpractical minded business people (would) now admit that there are occasions when
government intervention can be good for capitalism by saving it from some of the very forces it unleashesâ.
Clearly, âgovernment intrusion into the private sectorâ is not only useful but could be the most potent option in
certain circumstances. And, this is mindful of the fact that âwhen it comes to almost anything the government
does, ideology trumps facts, slogans trump reality, and loaded words (âsocialismâ) trump dataâ (Dionne,
2010:3). Governments in the developed world confronted the financial crisis unapologetically because the
wellbeing of their citizens was at risk. But can the same be said of developing countries, especially in Africa?
Protecting public interest: The African experience
The financial crisis had its collateral effects in the developing world. Research has shown that the growth rate of
many developing countries reduced considerably due to the impact of the financial crisis on commodity prices,
trade, remittances, and investment, and that the situation resulted in a sharp increase in the number of persons
living below the poverty line in those countries (Velde, 2009). But that notwithstanding, not much is said about
the management of the problem by the developing nations, especially in Africa where for the most part, the
weight of free market mentality is still holding sway.
Admittedly, some African governments crafted some sort of intervention measures in response to the problems
generated by the global financial crisis. But whereas the United States and the European governments
intervened in their economies with the âlargest liquidity injection into the credit market and the largest monetary
policy action in world historyâ, African countries that intervened at all did so less robustly. In Nigeria, for
example, the Central Bank injected a total of N620 billion (about $4.2 billion) into the financial sector to salvage
those banks considered to be in a âgrave situationâ from imminent collapse. As a further action, the Chief
Executive Officers of the worst affected banks lost their jobs. Though limited, the intervention still had a positive
effect on the economy. The Central Bank explained the position as follows:
In Nigeria, the economy faltered and the banking system experienced a crisis in 2009, triggered by global events.
The stock market collapsed by 70% in 2008â2009 and many Nigerian banks had to be rescued. In order to
stabilize the system and return confidence to the markets and investors, the CBN injected N620billion of
liquidity into the banking sector and replaced the leadership at 8 Nigerian banks. Since then, the sector has
considerably stabilised (Sanusi, 2010, p.1).
In addition to bailing out the ailing banks, the Nigerian government took other initiatives including the setting up
of Asset Management Corporation (AMCON) with the prime function of buying toxic assets from banks, and the
establishment of a N500 billion intervention fund for use in strengthening the real sector of the economy.
However, these interventions seem to be crisis-led. Also, they show no serious questioning of, or desire to
modify the countryâs version of the free market philosophy. The end result is the frequently encountered
inconsistency in policy direction, the best example being the fiscal policy measures announced about the close of
2010. After providing funds to the Bank of Industry (BOI) for onward lending on easy terms to manufacturers,
including firms in the dying textile industry, the government announced the lifting of the ban on importation of
textiles, apparently in the spirit of economic liberalism. That was without regard to the uncompetitive position
of local manufacturers brought about by dumping and the crippling shortage of necessary basic infrastructure.
The problem in the Nigerian case, and in similar cases in Africa, is clearly that of inadequate capacity of the
architects of government intervention. Akpakpan (2004) highlighted this problem as follows:
It is inadequate capacity that makes our governments and government agencies unable to deliver the services
they are expected to deliver, it is inadequate capacity that makes our government officials to accept inappropriate
pieces of advice from ill-informed external experts, and it is inadequate capacity that makes potentially sound
policies not to work in this country. Relevant capacity is crucial in all we do (p.32).
The policy failures and dismal performances of African economies, therefore, have a lot to do with the capacity
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of African governments â the capacity to discern and the capacity to sift through prescribed policy directions
introspectively. An example is the unbridled acceptance of the so-called Washington consensus about which the
following comments had been made:
The liberal economic policies packaged under the Washington consensus which aimed at opening up national
economies of those countries, and reducing the role of the state, with privatization, deregulation and support for
property rights (Williamson, 1990) is widely believed among scholars and practitioners to have generated policy
learning among nationsâŠ.Consequently, many of these governments almost copy blindly, and in the process end
up deteriorating their economies and worsening the plight of many of their citizens (Aikins, 2009:36)
The experiences of the more successful less-developed countries (LCDs) show that the market mechanism is not
inherently incompatible with government intervention or regulation. Indeed, it is the role of government to
ensure that the market works for the general good of society. And it does so by checking actual or potential
abuses of economic liberalism and self regulation â abuses that are capable of hurting the wellbeing of citizens.
This is what governments in the successful Asian countries, especially Taiwan, South Korea, and Japan did, an
approach which Robert Wade (1990) described as âgoverning the marketâ and suggested that âother countries
would be wise to learnâ (p.7). The challenging experiences of many African countries in their struggle to
improve the lot of their societies are, therefore, not attributable to the market mechanism per se, but to the
inability of the governments to use the market in ways that are best suited to their circumstances.
Conclusion
The global financial crisis has generated a lot of debate on the merit and adequacy of economic liberalism.
Alongside, the role of government has come under intensive scrutiny. But, drawing from the African experience
and, indeed, the experiences of other nations, it is clear that government intervention and the market mechanism
are not mutually exclusive policy options. They could, and usually do, complement each other. The problem then
lies in determining the appropriate mix that each situation uniquely demands. The capacity to identify what is
good in the market and in government with a view to harnessing them for the wellbeing of citizens is what
African societies really need, and should focus on in the struggle to improve economic and social conditions in
the continent.
References
Aikins, S. K. (2009). âGlobal Financial Crisis and Government Intervention: A Case for Effective Regulatory
Governanceâ. International Management Review, 10 (2). e-Journal at http//www.ipmr.net.
Akpakpan, E. B. (2004). âThe Struggle for Development: Why have some people been so unsuccessful? Uyo:
University of Uyo. !0th Inaugural Lecture, August, 19.
Anderson, S., Cavanagh, J., and Redman, J. (2008). âSkewed Priorities: How the Bailout dwarfs other Global
Crisis Spendingâ. Washington, DC: Institute for Policy Studies.
Dionne, E. J. (2010). âAuto Bailout a successful Government Interventionâ. Oakland: The Oakland Press.
August, 07.
Sanusi, S. L. (2010). âThe Nigerian Banking Industry â What went wrong and the way forwardâ. Kano:
Convocation Lecture to mark the Annual Convocation Ceremony of Bayero University. February, 26.
Smith, A. (1776, as abridged, 1993). An Inquiry into the Nature and Causes of the Wealth of Nations.
Indianapolis, Indiana: Hackett Publishing Company.
Velde, D. W. (2009). âThe Global Financial Crisis and Developing countries: Taking Stock, Taking Actionâ.
London: Overseas Development Institute.
Wade, R. (1990). Governing the Market: Economic Theory and the Role of Government in East Asian
Industrialization. New Jersey: Princeton University Press.
Wikipedia (2010). âFinancial Crisis of 2007 â 2010â en.wikipedia.org.
Williamson, J. (1990). âLatin American Adjustment: How much Happened?â Washington, DC: Institute for
International Economics.
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Vol.3, No.7, 2012
Table 1: US Commitment to Financial Sector Bailout as at November 13, 2008. ($Billions unless otherwise
stated)
Programme Amount Description
Original plan was to use the funds primarily to
Troubled Asset Relief Programme 700.00 purchase troubled mortgage related assets. The
(TARP) Treasury Secretary has since decided to use the
funds for cash injections for banks.
Through this facility, the Fed buys commercial
Commercial Paper Funding 243.00 paper (short-term debts) from banks to help
finance day-to-day business
Facility
operations.
Federal officials assumed control of the
Fannie Mae/Freddie Mac 200.00 mortgage firms and are providing cash injections
to keep them afloat
Does not include $40 billion drawn from the 700
AIG 112.50 billion $ bailout fund. After an initial bailout in
October, AIG negotiated a larger rescue package
with easier terms.
Bear Stearns 29.00 Special lending facility to guarantee losses on
the investment bankâs portfolio; facilitated
buyout by JP Morgan.
The Federal Deposit Insurance
FDIC Bank Takeovers 13.20 Corporation has put up to cover deposits on
failed banks.
Total U.S. $1.3
trillion
Source: Anderson, Cavanagh and Redman (2008) as presented in Aikins (2009)
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Table 2: Western European Commitment to Financial Sector Bailout as at
November 13, 2008. ($ Billions Unless Otherwise Stated)
Country Amount Description
The UK bailout was the first
announced and largely served as the
model for other European rescues.
United Kingdom 743.0 Half of the package is for
guaranteeing inter-bank lending,
40% for short-term loans and 10%
for recapitalization.
The bulk is to guarantee medium-
Germany 636.5 term bank lending, with 20% for
recapitalization
The bulk is to guarantee bank debt,
France 458.3 with about $50 billion for
recapitalization
To guarantee inter-bank loans
Netherlands 346.0
Sweden 200.0 For credit guarantees
For bank buyouts, interbank
Austria 127.3 lending, and
bank bond issuance guarantees
For bank buyouts, interbank
Spain 127.3 lending, and
bank bond issuance guarantees.
Italy 51.0 To purchase bank debts
Other European
Countries 110.6
Total European $2.8trillion
Source: Anderson, Cavanagh and Redman (2008) as presented ln Aikins(2009)
111
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