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Up to now the world politicians and the capitalist believed that capitalism would not fail under any circumstances but the current economic crisis world over is a clear reflection of failure of capitalism (America) and its consequent effect all over the world. As the overall impact of the recession around the world is due to the crash of the American Economy, I have occasionally mentioned America in this answer, my due apologies to my American friends if their sentiments are hurt.
Failure of commodity market!
The beginning of 80’s saw a new trend infact a new term initiated by America, OUTSOURCING. Over the last decade America has been gradually making redundant employees, closing industrial units and outsourcing cheaper goods from around the world, specifically China and creating employment elsewhere. America was once proud of its strong consumer base and Capitalism, as the list of outsourced goods grew, local employment opportunities started shrinking and also gradually shrinking was the buying power of average Americans. The same American consumer which was once its strength? Approx two million Americans have lost their jobs just in one calendar year 2008 itself. All the countries that followed suit had the same impact.
Failure of Financial Market!
While financial market did not had much impact due to outsourcing of labor force but the reason for the failure has been same as that mentioned above its reason has been same as above failure of commodity market. While funding of loans has been quite liberal in America, from where an unemployed consumer is suppose to pay for his loans. Economist may say that crash of stock market may be the reason for the loses but it is the other way round the stock market collapsed due to the mounting irrecoverable bad debts of individual institutions.
The same industrial houses who over decades have made thousand’s of billions in profit by shifting manufacturing basis outside America in the name of cost advantages have never passed any of these benefits to the consumer and America has seen higher inflation year to year and never tried to delve into the causes until they were making profit and the treasury was receiving the taxes. Surprisingly, the same corporations are queuing for government aid for their survival.
Every day few billion dollars are added to the original aid and have lost count of overall aid whether it is US $ 2000, US $ 3000, US $ 4000 billion …….. Will this help to revive the economy the American Economy is still not ready even to crawl. Some of the leading American industrial and financial houses, banks, and insurance and pension funds are almost bankrupt and asking for more financial aids from the US Government for its survival.
Who runs the economy?
It is neither the so called great industrial houses or banks or economist or politicians but it is the simple CONSUMER he is the true power that runs any economy. The needs of an average consumer are simple - a steady job to sustain him and in turn he sustains the economy. The repercussions in economies that have outsourced cheaper goods from offshore for more profits at the cost of local industry and JOBS are today evident.
Infact I feel that President Obama should had done the other way round splurged the billions on the American consumer instead of institutions and banks, these would had helped them repay their loans and revived the banks and similarly the money would had help to revive the commodity market and in turn created demand and the ball would had set rolling.
How to revive the economies?
If we have to revive the economy in all fronts entrepreneurial, industrial and financial it is necessary to return back to the ideals of Mahatma Gandhi and ‘SWADESHI’. SWADESHI – to manufacture ourselves from our own resources everything and anything that is possible for us. Instead of outsourcing from abroad which only creates employment opportunities elsewhere and helps other economies? Reopening closed units and setting up our own manufacturing facilities that will create more local employment opportunities increase the buying power of the consumer (put the money back into his pocket) who in turn will help to build a strong healthy economy and all of us can thrive and prosper collectively.
The above contents are edited version of my blog listed in the source below