Article Type
Article
Description
SEPTEMBER 15, 2009 marked one year from the day American financial firm Lehman Brothers collapsed. The subsequent onslaught on the global financial system set in a recession of the magnitude not experienced since 1930.
Financial institutions considered rock solid such as AIG and Citibank came almost on the verge of collapse. The world economy contracted for the first time in decades. But a year later the ‘green shoots’ have started appearing and the consensus view is that the global economy is coming out of the storm.
Economic historians will take many years to fully analyse the causes of the crisis but the policymakers cannot afford to wait. It is therefore important to draw some generalised lessons from this crisis.
The first lesson is that the slogan of ‘capitalism is dead’ and the concept that nationalisation of private assets is now the norm are highly misplaced and are not substantiated. Yes, the western governments had to intervene in a big way, spending trillions of taxpayers’ funds to rescue the banks and inject equity, but this was required as a temporary measure to save the financial system from total meltdown. The excesses and greed of the bankers did play havoc, but there is no cogent reason to expect that private ownership and market mechanisms of resource allocation would give way to permanent public ownership and an administered allocation system.
Publication Source
Dawn
Publication Date
9-28-2009
Pages
1-3
Recommended Citation
Husain, Ishrat. (2009, September 28). Lessons from Financial Crisis. Dawn, . 1-3. https://ir.iba.edu.pk/faculty-research-press/492
