Every nation in the world has the responsibility to manage the way to forward its economic goals by taking advantage of the availability of natural endowment at its disposal. The earlier economic thinkers in the 18th century believe the intervention of economy by the government as the last ditch attempt to economic recovery.
Adam Smith, the political economist in the 18th century was a great advocate of market mechanism according to his treatise: “The Wealth of Nations” in 1776 expounding on how the State should develop its domestic market to promote the living standards of its people. He wanted to find an answer to the question as to why some nations are more developed than others.
The Great Depression in 1929-1939, affected many nations of the world, particularly in Europe and America. Historically, it was the time when the world’s worst economic hyperinflation occurred in the Weimer republic of Germany. In America about 5000 banks were closed down as a result of severe economic crisis. Unemployment went on a high record. In many places feeding centers were opened.
It is a noteworthy to remember that the entire world were then on the brink of an abyss of economic collapse. Thanks to J.M. Keynes, a British economist who was the man that saved the world from the economic catastrophe. In his book titled “The General Theory of Employment, Interest and Money” published in 1936, he pointed out how the government can forcibly intervene the situation in the event of economic difficulties by means of both fiscal and monetary policies to overcome the economic distortions in the system. Today, Keynes was regarded as the father who revolutionized the theory of macroeconomics. However, there are groups of post-Keynesian economists who are critics of his new economic models. Now, there are two economic clubs in the world, a club who are the followers of Keynesian theories known as the “Cambridge Keynesians,” and an opposing club led by the former noble prize winner at Chicago School of Economics, Milton Friedman who is also known as “Uncle Miltie.”
Friedman was a critical advocate of the economic liberalization from 1970s until his death in 2006. He believes that the government should not intervene in the economy, and instead favor the private enterprise – his mantra a mutual interest for capitalism includes:
- Cut to social spending
He had laid the foundations for capitalism whereby only a few groups of the people would be powerful economic masters at the expense of a majority of the people. His philosophy of economic legacy had serious consequences on the livelihood of millions of people around the world. For example, today many people could not afford to pay school fees for their children as result of privatization i.e. health and education etc. This has reduced the government’s public institutions to a mere non-functional entity. He coined a phrase for this painful economic tactic “shock treatment.” In the decades since whenever the government has imposed sweeping free-markets reform, the all-at once shock treatment, or “shock therapy” had been a method of choice. Friedman did this in 1970s in Chile under the late dictator of General A. Pinochet. “A variation on Machiavelli’s advice that “injuries” should be inflicted “at once,” this is one of Friedman’s most lasting legacies.” The economic world order had been changed by the unified brainchild of Milton Friedman, Reagan and Ms. Thatcher who had played a well crafted role of economic hypocrisy to scramble for the world’s resources solely through the prism of their personal interests. The market crash of some Asian countries in 1997 was part of the systematic approaches to economic sabotages following massive capital flights into western countries.
On September, 11, an ideology hatched in American universities and fortified in Washington institutions finally had its chance to come home again, the Bush administration packed with Friedman’s disciplines in his administration, including his close friend Donald Rumsfeld, best understood as a “disaster capitalism complex,” to create for profit venture that has breathed new life into the faltering US economy.
Abdulqadir Omer Jama
Tel. 252 63 4424183
The views expressed in this article are the author’s own and do not necessarily reflect Horndiplomat editorial policy.
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