to read Jorg Althammer’s article, click on
In 2007 and 2008 the US housing market almost completely collapsed. The crisis was brought about by a combination of state- and market-failures that intensified each other. The failure of the capital markets was a result of extensive deregulation. The principle of liability was violated. Failure risks were passed on without making transparent the actual risk of a security for the buyer. The rating agencies did not assume any liability for faulty assessments.
The dramatic crisis on the international financial markets fundamentally upended trust in the market economy. Critics of free enterprise systems use the financial crisis and the continuing growth weaknesses of developed market economies as reasons for questioning the free enterprise system altogether.
All highly-developed free enterprise economies are showing a clearly slackening economic growth. This slowing down of the growth process is an economic necessity. No one can expect national economies with a high per-capita income to grow at the same rate as threshold countries or the Federal Republic of Germany in the phase of reconstruction. That this growth process occurs in cycles is a system-conditioned necessity. Knowing that these cycles are primarily exogenous, avoiding these cycles cannot be the goal of state economic policy. Rather the challenge of state economic- and social policy is to keep these fluctuations as low as possible and cushion the social consequences of the recession. This should happen through the automatic stabilizers of the system of social security. Massive crises like the present crisis on the financial markets are results of misguided political-economic framing conditions. Thinking back to the foundations of the social market economy, particularly to the principle of private liability, can help prevent dislocations of this magnitude in the future.
Marc Batko, “Alternative Economics: Reversing Stagnation,” 159 pages, Smashwords, April 2016, https://www.smashwords.com/books/view/627516
Bill Black on the Corrupt Culture of Wall Street, April 2016