Is Globalization the Main Culprit for the 2008 Global Financial Crisis

The global financial crisis that began in late 2007 but erupted in 2008 was considered one of the worst threats to the global economy. The global financial crisis was characterized by credit crunch and the collapse of stock markets.Advertising We will write a custom research paper sample on Is Globalization the Main Culprit for the 2008 Global Financial Crisis? specifically for you for only $16.05 $11/page Learn More The results of the crisis were massive since it led to the evaporation of investment decisions by firms, loss of jobs and loss of income. There was generally an economic recession in majority of the developed world and hence it slowed economy in the developing world. It is true that globalization is linked to the global financial crises. I agree that globalization is the main culprit of the financial crises; this is largely because the agents of globalization are largely associated with the emergence of global financial crises as will be exp lained below: Main Analysis Globalization can be defined as the intensification of trade and other economic activities between countries of the globe in terms goods, services and also investment. After the cold war, majority of the countries embraced the basic principles of globalization like free trade. The plain understanding of globalization is in the perspective of free trade, the function of foreign company and trade. Globalization as a phenomenon is often linked with financial de regulation and the neo liberal economic revolution; but the Asian financial crisis, the Enron scandal and the growing inequalities together with the financial crisis have lead to more concerns on the neo-liberal strategy. The negative effects of globalization on a national economy can be so disastrous according to the works of Joseph Stiglitz. There has been a lot of opposition to globalization since it is associated with the volatility of commodity prices and its impact on the distant economies. The ever spiraling increase in the global prices of food and fuel is considered a result of globalization. In the 2008, for example, the surge in the prices of fuel and food commodities which are the fundamental commodities in the global market negatively impacted on the world economy. The main reason why there was an increased volatility in the global market during the 2008 financial crisis as opposed to other crisis is due to the globalized economy (Turner and Khondkar 42).Advertising Looking for research paper on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Globalization has eroded the powers and the sovereignty of the state, the role of the state to regulate and to steer forward the economy has been largely ignored at the expense of the market, these are the problems and the vulnerabilities that often emerge as a result of the globalization of the world economy. Financial liberalization involves the elimination of tari ffs, and duties have resulted in an unrestricted cross border transaction. The 2008 economic crisis was largely associated to the collapse of the Lehman bothers, which was the largest American investment bank; this brought to fore the function and the capacity of state institutions and revived the debate that despite the growth of globalization forces, there should always an efficient state structure (Turner and Khondkar 58). The trend of globalization had been increasing after the end of the cold war when America was declared the world superpower following the collapse of the USSR. This trend of globalization had been characterized by the increasing levels of trade, intensified movement of people and the advancement of technology that has brought the people and the entire world into a closer economic, political and cultural unit. It is this increasing independence that led to the 2008 global financial crises due to the fact that the monumental accumulation of global debt in the Ame rican financial institutions was unsound. The 2008 economic crisis had roots in the 1997 financial crisis in the Asian region; after the collapse of the Asian markets, people opted for the USA as a favorite investment destination. This led to the increase in the value of stock market and the rise in the price of housing. This movement of capital from one location to another like for example the Asian Region to the US was made possible by globalization and hence globalization is directly linked to the global financial crisis of 2008 (Bulliet et al 824). The institutionalization of global phenomenon like the financial globalization has contributed to the increase in the inequality gap between the developed and the developing countries; this is largely associated with international capital flows. Financial globalization was touted as the best mode of enhancing savings, relax the credit stress, and improve the income of the developing countries and to stimulate economic growth.Advertisi ng We will write a custom research paper sample on Is Globalization the Main Culprit for the 2008 Global Financial Crisis? specifically for you for only $16.05 $11/page Learn More This was never to be the case as financial globalization could not meet these expectations but instead it helped intensify economic instability. Trade liberalization together with its expected impact like prospect of economic growth, employment and income inequality came under close scrutiny. The emergence of financial globalization and wealth inequality has resulted in the unequal flows of capital and also uneven progress in the opening of capital accounts; unlike in Asia and Western countries, those of Africa and the Latin America have lagged behind in opening their capital accounts. The world has witnessed uneven financial globalization which is linked to the global financial crises (ILO report 39). Emmerich and the group in their book titled Globalization 2.0: roadmap to t he future from leading minds have identified seven virtues of globalization and in these virtues, one has been linked to the global financial crisis, and this is the thrift; Emmerich, Ijioui and Ceyp related this virtue with 2008 global financial crisis and the increasing opulence in some parts of the world. They argued that in the western world, people had socialized themselves with the period of cheap money and hence they considered it primitive to save money leading to the decline in savings in Anglo-Saxon countries like the Britain, Canada and the US. These countries were paragon of economic and financial culture and hence they adopted the culture of non-saving. When the global recession hit, commercial banks had run out of savings, the population had little to spend and hence generally low liquidity level which resulted in the collapse of commercial banks (Emmerich, Ijioui and Ceyp 80). When the global financial crisis is analyzed in the context of globalization, then the insta bility that is created by the speculation about trade is worth mentioning.Advertising Looking for research paper on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More The global financial crises did not only concern the financial markets but also the international institutions and its productive structure since globalization is controlled at the core and its effects will only be triggered at the center and will be felt across the globe as exemplified by the 2008 crisis that was triggered by the financial markets in the USA and was felt all over the globe. Due to the forces of globalization, financial crisis can be mad-made; the realization that the global world desperately needs oil and the fact the Washington consensus legalized trade liberalization makes the world vulnerable to the whims of cartels, especially if they have the knowledge and the ability to determine the timelines of the speculative course and the subsequent collapse of the speculation who can take advantage of speculative trade to push the prices of crude oil upwards (Chodussudovsky 1). Conclusion The occurrence of the global financial crisis in the year 2008 was considered glob alization at its death-bed; there was an imminent dissolution of the globalized world. This was further exacerbated by the fact that the global financial crisis was followed by the world economic crisis, which was a reflection of how the global chain reaction can be triggered and can interact to pull a destructive fashion. There have been some demands that the goals of globalization should be redefined that is; world leaders should consider other ways of cooperation and also they should create institutions that should be used in solving international disputes. With the current developments with regard to the three forms of globalization; global markets, infrastructural development and global corporations, then the future appear bleak since these forms of globalization are man-made and hence volatile and prone to suffering from the vagaries of nature. Globalization has led to simultaneous impoverishment of individuals from different nations largely due to the global market mechanism factor. The several global financial crises are not only due to the volatility of the financial markets but also due to the collapse of state institutions and the development of rapid profit ventures. Works Cited Bulliet et al. The Earth and Its Peoples, Volume 2, 5th Ed. New York: Cengage Learning, 2008. Print. Chodussudovsky, Michel. Global financial meltdown. Global Research, 2011. Web. https://www.globalresearch.ca/global-financial-meltdown/10268 Emmerich, Heike., Ijioui, Raschid and Ceyp, Michael. Globalization 2.0: A Roadmap to the Future from Leading Minds. New York: Springer, 2009. Print. ILO report. world of work report; income inequalities in the age of globalization. ILO Report, 2008. Web. http://www.ilo.org/inst/lang–en/index.htm Turner, Bryan and Khondker Habibul. Globalization East and West. New York: SAGE Publications Ltd, 2009. Print. 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