Socialist solution to Capitalism?

The crisis suffered by the world’s economy today showed the inherent flaws of the
capitalist system. The imbalance of productivity between countries, and the predator
instinct of the capitalists are the main causes of system contradictions that usher extreme
economic gaps in the social structure of many countries.

I know that capitalism is still far from perfect, but governments should have learned from
the several incidents of economic crisis in many countries during the past 3 decades.
These were signs that the system’s flaws were taking over from what many thought as the
natural process in the golden age of capitalism.

The great depression of 1926 that ended before the Second World War was a failure to
adjust to the systemic flaws of capitalism. Capital from speculative source such as shares
of stocks and government bonds are too risky for a system that is influenced by voracious
companies who wanted to control every inch of all free trade. The system was never
reformed and instead reinforced after the war. The concept of “market is good and
government is bad,” freed the market further that detests government interventions.

The system’s failure was highlighted by the malfunction of globalization as a strategy to

even the market. Instead, globalization heightened the contradiction of the system who
continually strives for sustained increase of demand of products produced from cheap
labor. This in itself is a contradiction – for how could you increase demand if wages are
low? Wage earners that compose the majority of consumers have very limited purchasing
capabilities. Instead, inequality gap between the few very rich and the many poor
increased. Moreover, there is a wide gap in terms of productivity among rich and
developing countries.

Many large companies from rich nations transferred their factories to countries that offer
cheap labor in order to compete. Yet their main markets are the rich nations whose
population incomes are shrinking. Greed and lack of government intervention, the
capitalists in these rich nations continue to accept financial investments that are excess of
other countries such as financial capitals from China, Taiwan, South Korea, Japan and
many other investors from other countries to support their insatiable need for profits.
Housing loans in the US suck up more than 111 trillion dollars of capital from all sources.
The loans were offered at low rates with very relaxed terms. The availability of money
made the low income earners borrow beyond their capacity, and many are engaged in
unproductive speculation – such as investing in stock markets. Suddenly, the feast ended.
The system exploded! Stock values of companies worldwide collapsed, and invested
capital including company equities melted.

In the United States of America, the end of Lehman Brothers and Merrill Lynch, two of
the largest Wall Street investment banks, one week after the government takeover of the
mortgage finance giants Fannie Mae and Freddie Mac, marks a new stage in the
convulsive crisis of capitalism.
However, this event exposed the other side capitalist thought that firmly abhors
government intervention. I wonder if, this could be the beginning of a capitalist system
that allows government intervention in a “free market?” This is a strange. Rabid
capitalists would never allow government to have significant control over the economic
affairs of the nation particularly the market. But now, they are begging for it. They
wanted the American Federal Reserve to buy toxic assets of companies that are on the
verge of bankruptcies. They fear that without the government’s money, investor’s
confidence to the capitalist system will be lost.

But at what extent? If the American government agrees to intervene, this would mean that
the defenders of capitalism agrees to the thought, that soon the government will have
direct control over the much touted free market economy!

The socialists must be too delighted by the capitalists’ change of heart.

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