Friday, November 7, 2008

CONVERSATION VIDEO -Death Penalty-

INTERVENTIONISM: A REAL NECESSITY -Argumentative Essay-

Any affectation of economic activity by the State is seen as interventionism. In any modern society there is some kind of state intervention in the economy: all governments provide some public goods and regulate, through laws and decrees, certain aspects of economic activity. Nowadays, there is much controversy about the relevant of state intervention in the market to face the actual financial crisis of the world. Some people believe that the market is which should correct the crisis without the intervention of the state. However, under certain circumstances must be precisely that the state develops certain economic activities that protect the rights and welfare of the majority of the population. This essay will examine some arguments on behalf of government intervention to overcome the global financial crisis.

First of all, there are cases where it is imperative to defend interventionism, as it becomes necessary and appropriate. Such is the case with the interventionist position that has had to assume the United States Government faced to the financial crisis that began 14 months ago and that promises devastating effects on the market and society in general. In the last decade countless abuses were committed, in which the real estate sector and the entities that financed it won a lot of money, while citizens are indebted far beyond their possibilities due to interest rates set below the minimum. The excess of confidence coupled with the inefficient controls did that almost anyone acknowledged that there was a monstrous accumulation of risk, and now this concept of risk has paralyzed everything, so that banks do not trust on anybody, not even in themselves, and they do not lend money between them, and the interbank system has collapsed. Thus, cases like this expresses the imperative need to do something quick and effective to try to prevent that economy enters into a disastrous recession and that the debts of thousands of employees and families finish in the crumbling of financial system. This need for a rescue plan merely alluded to the need for state intervention.

Moreover, the crisis has put the interventionism fashionable. The recapitalization is an option that is being considered by Germany, France, Italy, Austria or Spain, but those which planned to allocate more money to nationalize the banks are paradoxically the United States and United Kingdom, two countries that historically have fled over state intervention in markets. Here is denote the importance it has taken interventionism in recent days, as even the administration of George W. Bush has decided to implement it.

Furthermore, there are cases where the use of interventionism was not only appropriate but also has yielded effective results. In wartime, in 1917, the U.S. government did not hesitate a minute to take control of the railways to ensure supplies of food to the population and the transport of troops and weapons. In 1920, these assets were returned to their owners, with compensation. During the Second World War again were temporarily expropriate the railways, a dozen companies and several coal mines. More recently, either the government or the Federal Reserve (Central Bank) have come to the rescue of Bear Stearns, Fannie Mae, Freddie Mac, Merrill Lynch and AIG. So, the nationalization of one part of banking system in the United States represents a very good option for the sector to capitalizes itself and then it eliminates the market's concerns about the solvency of the financial system and it could be the beginning of the end of the financial crisis.

Additionally, the interventionism of the state is vital to ensure the welfare of the majority of people in crisis situations. Either way, the public intervention of a government like Bush’s Government that afraid of the word socialism is simply the result of the despair that involves the biggest financial crisis and people know that if they do not take cards in the problem, it will lead us to an economic crisis in which the impact would be reflected negatively in the whole society. In those cases the experts consider very important intervention of the state, in other words, the state is not letting that the market plays their freedom and autonomy to solve its problem, because it is a big problem that affects the most of the world population and therefore it is necessary to take drastic solutions.
Nevertheless, some people fiercely defend the free market because they believe that markets should correct its own imbalances. To a certain extent they are right, the policy of free market ensures the existence of real competition in the market, that is, markets that go wrong are forced to improve their deficiencies to remain their place. However, statistics show that this would be a slow solution that could take a quarter-century and governments like the Bush’s Government urgently need a solution that avoids recession. So that, interventionism is necessary to quickly alleviate the crisis and the high cost of rescue, which involves investing around 700.000 million dollars.
In addition, some people think that any intervention will lead them towards more central planning of society, that is, toward socialism. Notwithstanding, economic theorists argue that there is a big difference between socialism and interventionism. They speak of interventionism only when almost all economic activity in a nation is directed and carried out by the State covering the entire range between free market economy and socialist economy. Besides, if the State affects all economic activity in the nation they speak of a socialist economy, in other words, the experts believe that interventionism reduces autonomy but it do not mean that interventionism eliminate completely autonomy. Thus, after seeing this evidence, there is no way we can agree with what people think against interventionism.
To sum up, in situations of crisis, the state should continue using the interventionism to ensure the rapid welfare of the majority of people. In my opinion, governments are willing to break all the rules and ideologies, in order to they save the system because in these cases they do not understand about economic theories and much less about policies of free market, then, the future of interventionism is written.