The Current Discussion: Will the current financial crisis discredit free-market policies in your country? Is socialism an echo of the past or a preview of the future?
The basic presupposition of a free market approach is that people will be responsible for the choices they make. The choice to participate in an already over-leveraged market is not an imposed one. At the end of the day the person investing in the stock market knows, or should know, the risks that he or she faces.
Thus to assume that the practice of free market economic choices when leading to a crisis will result in a discrediting of the free market itself stretches the argument a bit too far. What is now happening in the financial markets is akin to a bloodbath, and nothing is being spared in the ensuing meltdown. It will eventually stop - it has to. The question is how far down. For a man tumbling down the cliff without a parachute, it's little comfort to shout, 'You'll be OK, only another fifty feet to fall!' The fact is that this particular man will not be okay -- however, the sentiment of the market will return and once asset values have depreciated enough to be reasonably comparable to the equity levels that support them, the market will then settle down.
That's the situation in the U.S. The situation is more interesting in the GCC (Gulf Cooperation Council) states, which also happen to be large producers of oil. Markets in those states have faced sympathetic weakness, but nothing to panic about. The smart players were sitting on the sidelines, so given the enormous amount of liquidity in the market it is more than likely that enough money is around to support the market. And the idea of a socialist economic model is totally alien to this region. In a number of these countries the social welfare system actually performs remarkably well, providing free education and a good health care system. The fruits of democracy may not be hanging off the tree of social justice, but in essence the option of economic wellbeing is more important to many people. There is no political will for a socialist-type system in these societies. While political awareness is growing, and in a number of countries the mandate of governance may come into question, I have always felt that the economic well-being of the people will determine the political will of the people. So far the mandate has been upheld remarkably well in a region full of turmoil. In a number of GCC countries the growth of personal income and the creation of economic wellbeing has been relatively good.
One can, as I do, take a broader view of the forest and come to the conclusion that the current financial crisis is just another bump in the road, and that reassessing our lives in this situation would perhaps be a good idea. When the market collapses like this, I like to remind myself that it's just new value being created.
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