The Crisis of Capitalism, are we really using the right system? Capitalism has been the champion of the free market system, but is there an issue with the foundation of our system.
David Harvey talks about the inherent failures of our system, but is there really a better alternative?
I personally believe that in this video David Harvey is biased against the capitalist system. He does make a point of taking a Marxist point of view to address the issue of barrier points that capitalism may face, and this sets the tone for his perspective. From my understanding Harvey is in favour of more regulation, as he spoke about financial ingenuity and innovation he basically slandered the movement from manufacturing & industry to finance. Due to his bias I believe he failed to develop the point that this change had been positive at the time and lead to substantial economic growth. I assume that Harvey’s stance would be towards a command economy, due to the several factors he mentions.
There are five general points developed, Harvey makes a notable reference to Alan Greenspan’s comments on the crisis (many people had blamed him to be a contributing factor to the sub-prime mortgage crisis) as Greenspan notes that it is human nature that lead to the failure (human frailty). This is in reference to qualities such as greed and instinct for mastery, on this point I would have to agree with Greenspan as no matter what system is used we are a big factor in contributing to error (impossible to have a perfect free market, purely theoretical). The second point is the obsession with false theory; at this point I believe that Harvey establishes him to be against free market economics. Harvey considers that peoples false belief in the efficiency of markets is what contributed to crisis, and mentions Hyman Minsky’s theory of the inherent instability of financial activities. To an extent I would agree that absolute belief in the efficiency of markets can only lead to systemic failure, as free markets are prone to speculation and the development of bubbles. I believe that Minky’s theory is a fair while analysing economic trends, as instability at certain periods of time is almost unavoidable.
I personally believe that an error of free market economics that led up to the financial crisis was the driving up of the credit economy, which was a result of wage repression after the 80’s. The development of the credit economy let people live beyond their means (increase in effective demand). However there was a vast accumulation of debt, and In the U.S. it was concentrated in the housing market this was a contributing factor to the crisis. In Minsky’s theory he mentions that a mechanism that pushes towards crisis is the accumulation of debt by non-government sectors. I believe that too often the 2007-2008 financial crises is blamed on poor policy and institutional failure and not enough on the fact that the people are to blame as well as those in power.
I fully appreciate David Harvey’s perspective, however I believe whether it is a capitalist system (free market) or a socialist one (command economy) failure and crisis is inevitable part of economics, a part of human nature. We attempt to apply theory to reality, and in that is the digression of successful economies.