Bad News For Free Markets?
It’s too soon to tell exactly how the U.S. financial crisis will impact the rest of the world, but, according to a report in The New York Times, the U.S. has just lost some free-market street cred.
In extending a last-minute $85 billion lifeline to American International Group (AIG), the troubled insurer, Washington has not only turned away from decades of rhetoric about the virtues of the free market and the dangers of government intervention, but it has also probably undercut future American efforts to promote such policies abroad.”
The shock waves from the U.S.'s financial woes are already being felt around the globe, with Russia suffering from “one of the worst market falls” since 1998 and Asian stocks hitting a three-year low.
The world's poorest countries will especially feel the pain of the crisis. This week, United Nations Secretary-General Ban Ki-moon said he feared that the crisis could seriously hurt poverty-fighting efforts in developing countries. These efforts depend heavily on rich donor countries and if these countries’ capacity for funding development efforts shrinks, many will suffer. Resuming the collapsed world trade talks, Ban said, is even more important in the wake of the financial turmoil.
As of Friday, the U.S. government's nearly unprecedented bailout has stabilized the market, prompting worldwide stock rebounds, but causing skepticism that the action is only a temporary fix.
If worldwide confidence in the free market drops as The New York Times article suggests, could it hinder future world trade talks — and development efforts — to an even greater extent?
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The "S" Word
The US economic crisis is undoubtedly already affecting economies worldwide, which extraordinarily does not exclude first and second world countries such as those in the EU. Consequently, if the US does not steady itself, the costs will snowball and take more forms than just economics. This being said, the EU members, which are not pure capitalists and have hints of socialism, are remaining stronger than the US, an almost pure capitalist (free market) country, at this time of world wide economic turmoil. Therefore, among other reasons, the infamous American free market has acquired a reputation of being economically delicate, which I believe will never regain its fame for being unshakable economically that it has maintained since the country’s birth.
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