Introduction and Summary of Readings
The spheres of international monetary economics, political economy, and finance are considered to be the areas of numerous discussions and misunderstandings. In spite of the fact that certain groups of people have to gain control over the fields identified, as a rule, if some mistake or challenge takes place, almost all countries around the whole world have to undergo numerous changes, suffer from economic or financial, or even both crises, and be unable to take the actions which may improve the situation within a short period of time.
One of the latest events which covered the whole world was the economic crisis of 2008. However, the main point is that this crisis is regarded as unpleasant surprise for many leading countries that was still predictable or even predicted.[1]
In order to understand the reasons of the crisis and its effects of the economic and financial sectors, a number of researchers and economists try to offer their assumptions, ideas, and analyses. In this paper, attention will be paid to the works of three amazing economic writers: Joseph E. Stiglitz, Paul Krugman, and Robert Wade. Their ideas are captivating reflections on the economic crisis that took place in 2008 and covered the whole world. Each paper is a unique evaluation of the events and the possibility to explain what caused the crisis.
“Financial Regime Change?” is Wade’s attempt to consider the political aspect of the regimes under which world economy is developed. What he offers is to focus on the “dominant ‘global’ model of financial architecture of the last two decades, the credibility of which has been seriously damages.[2]”
Krugman’s “Can Europe Be Saved” contains the information about the introduction of a single European currency as the “logical next step[3]” and the events which took place in Europe to cope the crisis spreading over the whole world.
Finally, “From Freefall: America, Free Markets, and the Sinking of the World Economy” by Stiglitz is the evaluation of the economic crisis and the financial sector in different developed and developing countries and their direct connection to the USA system.
Analysis
For a long period of time, it was not that easy to define true reasons of the economic crisis that caught the world in 2008. The conditions under which people could develop their financial operations, create dreams, and build plans seemed to be rather successful; however, one day, several countries faced a challenge defined as inability to control the housing bubble and perform the functions which were necessary to manage risk.[4] The world and the USA in particular were not ready to solve so many problems at the same time.
The point is that the USA is the country that serves a successful example in different spheres of life for many developed and developing countries, and when it became evident that the country could not resist a number of real estate problems. Even the activities of the financial markets turned out to be unsuccessful, and Stiglitz admits that “the banks got hoisted by their own petard: the financial instruments that they used to exploit the poor turned against the financial markets and brought them down.[5]”
However, it is necessary to admit that the USA was not the only country that had to re-evaluate its positions and opportunities. As soon as the problems in the economic and financial fields became evident, several European countries got involved into the crisis. Of course, the situation in the USA was not crucial for the development of economic crisis in such countries like Spain or United Kingdom, still, a certain portion of relations between the banks influenced the development of financial problems.
At the beginning of the 2000s, the situation with the foreign currency markets worsened considerably: housing bubble and its impact on the percentage of GDP in America, for example, prove that all past experience was not as influential as it was in 2008. Wade indicates that in 1980, US debt in finance was about 21%, and in 2007, it was about 116%.[6]
This is why the level of experience and the quality gained during the last years did not provide the Americans with the possibility to control their political economy as well as financial sector. Though many American economists tried to link the crisis of 2008 with the events during the Great Depression, it was not enough to avoid losses and benefit from the incomes identified.
In addition, all three authors under analysis admit the UK’s role in the development of the crisis around the whole world. Certain attention should be paid to the promotion of Euro as the only common currency in Europe.[7]
It is necessary to underline that a number of advantages of a single currency are evident: people should not take care of currency exchange while visiting different countries, export and import is based on one single system, and it always seems to be easy to gain the necessary control over one currency that promote successful existence of several currencies at the same time.
However, some countries were not ready or eager to accept one currency as they were confident in the power of their own currencies. This is why it was hard to find the necessary alternative and achieve appropriate agreements on the international arena.
Taking into consideration the ideas offered by the writers, their main weakness is that all of them try to find a country or even certain people to blame on or evaluate past experience to find some solution to the current problems. It is wrong to believe that there is one particular source of negative experience and crisis in the world.
Each country has its own grounds, make its own mistakes, and suffer because of its own inabilities under certain conditions. The crisis is the result that people stop taking care of their mutual prospects but become too egoistic, this is why the problems on the international arena appears, and economic as well as financial sectors undergo a number of difficulties.
Application
Nowadays, the situation seems to be better than it was in 2008. Some countries like the USA or Great Britain find the solutions to their economic and financial problems.[8] However, to improve the conditions and promote safe living conditions, it is necessary to maintain some special activities and ideas.
Information offered in the articles and personal understanding of the issue is of analytical character, this is why the authors aim at discussing the events and defining their positive and negative aspects, and their ideas can hardly be applied to some current problems and challenges.
Still, one lesson may be taken from the works: each crisis, economic problem, or financial challenge has its own roots and reasons, however, it is not always possible to define a true nature of problems. And to improve the situation, it is necessary to avoid the idea of making some fast decisions but try to analyze the situation from a variety of perspectives.
Conclusion
In general, the ideas offered in the articles by Stiglitz, Krugman, and Wade are powerful indeed: the economic crisis of 2008 is an important event that promotes a number of changes on the international arena. Numerous banks and other financial organizations have to re-evaluate their possibilities and their weaknesses in order to create better conditions for the citizens. And if someone wants to make some improvements in a particular sphere, it is better to evaluate the whole situation and then offer solution and integrate ideas.
Works Cited
Krugman, Paul. “Can Europe Be Saved?” The New York Times, 2011. Web.
Stiglitz, Joseph, E. “From Freefall: America, Free Markets, and the Sinking of the World Economy,” in Essential Readings in World Politics by Karen A. Mingst and Jack Snyder. (New York: W.W. Norton & Company, 2010).
Wade, Robert. “Financial Regime Change?” Manifest, 2008. Web.
Footnotes
- Joseph E. Stiglitz, “From Freefall: America, Free Markets, and the Sinking of the World Economy,” in Essential Readings in World Politics by Karen A. Mingst and Jack Snyder. (New York: W.W. Norton & Company, 2010) 554-573.
- Wade, Robert. “Financial Regime Change?” Manifest, 2008.
- Krugman, Paul. “Can Europe Be Saved?” The New York Times, 2011.
- Stiglitz, 554.
- Stiglitz, 561.
- Wade, 6.
- Krugman, 2.
- Stiglitz, 565.