Kevin Rudd’s Essay-The Global Financial Crisis

If you would like to read Kevin Rudd’s recent essay that he wrote for “The Monthly” entitled “The Global Financial Crisis” you can click on the following link which will load the document into Adobe Reader which you can then print out.

http://www.alp.org.au/download/now/rudd_feb09_monthly.pdf

His article explains how the economic ideology of an extreme “free market” system is faulty.  This has also in the large part been the cause of the present economic crisis.  Instead he advocates a more Keynesian approach which  involves a  suitable balance between government intervention and market forces to stabilise the economy. 

For those who do not know what the “free market” concept is,  it could be explained in the following way.  Imagine there is a school of children who are all going about their business trying to satisfy their own needs and wants.  Inevitably there will be the bigger stronger aggressive children,  some could even be bullies who have no disregard for the school rules or basic human decency.  There would also exist the weaker children , perhaps with handicaps or disabilities and other children.   A “free market economy” believes that without any “teacher” or “authority” intervention,  all the children will be able to work out all their differences on their own resulting in harmony.  In other words they believe things will just work out all by themselves. 

It is clear that this would be a ludicrous belief.  Ultimately if left to their own devices ,  the aggressive players or bullies would be controlled by their own selfishness and greed and hence probably annihilate and destroy the weaker players or children.   Because there is no teacher (or government intervention by appropriate authorities)  these bullies or stronger individuals, would just make up their own rules for the benefit of their own greed and probably  at the expense of the rest of the weaker population .   The result is utter chaos,  where the aggressive players gain more and more power while the weaker “children” are left to suffer and die.  There would be no sense of social justice .

Keynesian economics however,  which Rudd is harkening back to, believes that an appropriate amount of “teacher” or government intervention is necessary to maintain fairness and equity in the group or society.  Appropriate rules or government regulation needs to be imposed especially on the big strong players in society so that they will not assume ultimate economic power at everyone else’s expense.   These “bullies” need a certain degree of “rules” so that they are not permitted just to become a “law unto themselves”.  This is what has happenned with the sub prime crisis in the US where banks were allowed to issue numerous unsecured loans and operate hedge funds creating a credit bubble which would soon burst causing a dominoe effect where the whole of the population world wide would experience a recession. 

It is just common sense that an extreme free market economic ideology does not work in the long term.  Unfortunately it is only after we have a major world catastrophe that these theories are being disproven, even though other modern economists have been giving these warnings for many years.   Perhaps only now people may sit up and listen.

The famous novel “Lord of the Flies” by William Golding, can also be an illustration of this point.  The story is about a group of boys left stranded on an island without any adult authority to lead and guide them.  Ultimately the bully of the pack grows to be so evil he threatens to terrorise and kill the other weaker boys and another boy who tries to protect and defend his friends.   If left to their own devices without appropriate intervention, the society results in utter chaos and destruction.  I realise this is a parallel example,  and just used to more clearly explain the concept of the “free market” economy.

Read Kevin Rudd’s article and he will flesh these concepts out in more detail.

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2 Responses to “Kevin Rudd’s Essay-The Global Financial Crisis”

  1. Trev Says:

    Bev,

    The discription you have given for a free market is simply a straw man. It is what is built up by every single proponent of increased government intervention. Unless you are advocating that the government only intervenes in obedience of the Law of God (e.g. ensuring equal weights and measures), you are begging the question…the school teacher can also be the bully/pedofile. The free market is based on private property (which the 8th commandment presupposes). Government interventionalism, especially via Keynesiansim, promotes unbridled government power. If you read my economic articles, you will note that I argue that much of the crisis can be pinned to intervention, not the free market.

    It is also interesting that “extreme capitalism” is blamed when no country in the world has a totally free (capitalist) market. All western economies are heavily (to greater and lesser degree) regulated and intervened by government redistributing wealth (i.e. stealing from one group and giving to another).

    Please come and read some of the economic writings I have posted here: http://www.anselmstudyhouse.com/index.php?option=com_content&task=category&sectionid=6&id=43&Itemid=106.

    in the service of the Christ,
    Trev

  2. aarwen Says:

    Dear Trev

    Thankyou for taking the time to respond to my blog entry. I agree with you that we should not revert to a total socialist or communist economic order. This is highly detrimental since it eradicates all forms of human rights and freedom of speech. However I am more in support of a healthy balance of the free market with government intervention.

    You will notice for instance that the main cause of the present economic crisis was caused by the greed of private bankers which infiltrated Wall Street and hence the whole of the world. This was caused by giving out home mortgages which were unsecured and could not be repaid. These mortgages were then bundled up then sold on to other financiers for huge profits. This was due to the private greed of these bankers. These then became hedge funds to be traded throughout Wall Street and interconnected to banks all over the world. The true nature of these deals were concealed by forms and contracts which could not be understood by ordinary people except the traders themselves. This is why this volatile bubble grew so big and escaped the detection of the general public and the government. These private financiers were putting their whole country and the rest of the world at risk for the sake of their own greed. This root cause of the economic crisis did not emanate from the government in any way.

    We must always put a guard against government corruption. Fortunately in western democracies there is an opposition party which has the role of holding the party in power accountable. This is different to pure communist or socialist governments where an opposition party does not exist.

    The advantage of having some economic sectors partly in government hands is that because they are funded by tax payers, the public sector does not have the sole and only focus to make a profit. In this way they have more time to also cater for fairness and social justice concerns in their decision making. They are not desperate to survive by creating a positive bottom line.

    Be that as it may the economic crisis can serve as a wake up call in society that people need Jesus in their lives to give them peace, comfort and security during these troubled times. From this we are hoping to see a world Christian revival.

    Thanks again for taking the time to read my blog
    God Bless
    Bev

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