Barack Obama has taken over the reigns of the world's most powerful economy 'in the midst of an unprecedented crises'. His nerve-tingling oratory may have won him millions of fans around the world, but now it is the time to get down to serious work. The biggest task before him is to 'reinvent capitalism'. 'Laissez-faire capitalism' pursued by his predecessor may be as dead as the 'Soviet communism'. The entire politico-economic model of free enterprise, rugged individualism and small government on which America built its global hegemony seems to have broken down. How else can one describe a situation in which all of the country's main financial institutions and many of its biggest industrial companies are effectively bankrupt and on government life-support?
'Laissez-faire' is a term used to describe a policy of allowing events to take their own course. Laissez-faire activists support little or no state intervention on economic issues, which implies free markets, minimal taxes, minimal regulations and private ownership of property. The collapse of Communism as a political system sounded the death knell for Marxism as an ideology. The events of the past few months have proved that laissez-faire capitalism has been a monumental failure in practice. Bush administration's reliance on unregulated markets was a primary cause of ruin for the US economy.
Observers point out that US deficits have largely been financed by foreign governments who continue to pump in money into US treasuries. But many of the Arab countries who ran huge surpluses due to high oil prices may be in for tough times ahead. It is a matter of time before the money managers will have to look for safer havens as US treasuries offer near zero yields. However, with Europe also in the grip of serious depression, there is no imminent danger to the US dollar's supremacy. It is time for Obama to rewrite the principles of Capitalism. Capitalism may still survive but in a new avatar, where the state will be required to play a major role. The belief that 'markets are always right' has been shaken.
The markets have greeted the swearing in of Obama with a thumbs down, because they know that the road ahead is going to be really tough.
No comments:
Post a Comment