Many people blame the 2008 financial crisis on the financial industry. Is that true? Does the financial industry really responsible for the 2008 financial crisis? I argue no. I believe that it was caused by something larger. I believe that it was by the system of capitalism that America so wholeheartedly embraces. Capitalism allows for people to strive to obtain as much profit as possible, and it also allows for a cycle of economic prosperity and downturn; both if which will be addressed in this paper.
To be able to understand how capitalism is responsible for the economic crisis, it is first important to understand what the 2008 economic crisis was. In 2008, the housing bubble collapsed. Many lenders of mortgages were selling their mortgages …show more content…
Throughout history systematic crises have occurred (Kotz 306). With capitalism the economy goes through cycles of prosperity (bubbles), followed by economic downturn. There are many examples of this. In the 1920’s people were living very well, people had more assets than ever before in American history. Then there was the stock market crash in 1929, which triggered the great depression (Kotz 306). Another systematic crisis happened in the 1970s with the oil crisis. In the late 1990s there was another crisis when the dot com bubble burst. The housing bubble collapsing in 2008 is just another example of a systematic crisis that capitalism occasionally brings. The 2008 financial crisis won’t be the last either; on the horizon economists can already see the student loan bubble bursting. None of these crises were easily solved with bailouts or new regulations, which is a key characteristic in defining a systematic crisis (Kotz 306).
In conclusion, capitalism led to the deregulation of financial industry, who embracing the notion of capitalism sought to make as much profits as possible, Even though it was the financial industry that led to the collapse, they would not have been able to even engage in the aforementioned risky activities without the capitalist system allowing to do so. History proves time and time again we can obtain great prosperity from capitalism, but there will be a price to pay later when the next systemic crisis
To be able to understand how capitalism is responsible for the economic crisis, it is first important to understand what the 2008 economic crisis was. In 2008, the housing bubble collapsed. Many lenders of mortgages were selling their mortgages …show more content…
Throughout history systematic crises have occurred (Kotz 306). With capitalism the economy goes through cycles of prosperity (bubbles), followed by economic downturn. There are many examples of this. In the 1920’s people were living very well, people had more assets than ever before in American history. Then there was the stock market crash in 1929, which triggered the great depression (Kotz 306). Another systematic crisis happened in the 1970s with the oil crisis. In the late 1990s there was another crisis when the dot com bubble burst. The housing bubble collapsing in 2008 is just another example of a systematic crisis that capitalism occasionally brings. The 2008 financial crisis won’t be the last either; on the horizon economists can already see the student loan bubble bursting. None of these crises were easily solved with bailouts or new regulations, which is a key characteristic in defining a systematic crisis (Kotz 306).
In conclusion, capitalism led to the deregulation of financial industry, who embracing the notion of capitalism sought to make as much profits as possible, Even though it was the financial industry that led to the collapse, they would not have been able to even engage in the aforementioned risky activities without the capitalist system allowing to do so. History proves time and time again we can obtain great prosperity from capitalism, but there will be a price to pay later when the next systemic crisis