At an eerie hour late at night, I was woken up by a rare call from a life-long friend. At first, I thought a loved friend or a relative must have died because it was very unlikely that anyone would dare to call me at that time unless it was absolutely necessary. He quickly told me that the Supreme Economic Council, chaired by King Abdullah, has taken a decision to guarantee the safety of bank deposits. While discussing the topic, he asked me what were other prominent economists in the United States and the rest of the world saying about the problem. His question led me into writing today's column. Since the beginning of the financial crisis I have been curiously following numerous opinions, analysis and views on the grass roots of the problem and the prospects for a recovery. Loads of articles, interviews and TV talk-shows have featured prominent economists and analysts, whose words on such issues receive deep respect. Experts are deeply divided on what the grass roots of the problem are and, therefore, on the way out of it. An apparent consensus is that the mortgage crisis, which hit the US banking system and ultimately put financial credibility on line, sparked the current crisis. But some believe that problems are with capitalism itself and its strict disdain of any government direct intervention. So, many key economists advocated more belt-tightening strategies for a crisis that is widely seen as another copy of the Great Depression, which swirled the world in the 1930s. They differ widely on how best to explain what happened. Some say the laissez-faire capitalism has drawn to an end and the world should seek another market mechanism that is not prone to market fluctuations. Others believe it has nothing to do with capitalism or its emphasis on free market and free trade. Fareed Zakaria, the top Newsweek editor, has written that market turmoil, meltdowns and recessions have long been part of capitalism and that this crisis is no exception. He added that capitalism is now an international observable fact and that there is no doubt it would continue to dominate the world economy for some time to come. Paul Krugman, a Nobel laureate and an outspoken critic of Bush's economic policies, has criticized the $700 billion financial bailout plan. In an Op-Ed column in the New York Times, he warned that the current turmoil in the financial market could well be compared to the Great Depression era. He also suggested that a global effort is much needed in addressing the crisis. Krugman hailed the British government's stunning decision to control the damage by demanding ownership stakes in banks if these banks ask for financial aid. John Stossel of the ABC news wrote an Op-Ed article in the Wall Street Journal dismissing the call for more government intervention in the financial market. He described the US financial bailout as “an onslaught of regulation” and stresses, though in a gloomy tone, that it would “fail and stifle innovation because markets are too complex to manipulate beneficially”. Rana Foroohar of the Newsweek was ostensibly busy tracking what capitalism enemies are reiterating regarding the downfall of free market ideology. She quoted countries like Russia, France, Germany and China, despite the global aspect of the current financial crisis, are cheerful with the demise of America as a financial superpower. Countries in Latin America with a history of anti-American sentiments, she added, would be relieved once the American model of finance is gripped into such a credit crunch. Robert Reich, former US secretary of labour and a professor at the University of California at Berkley, posted a blog in his weblog in which he shed doubts on the American intervention in the market describing it as insufficient and warned that unless there is a decisive action plan, there are many other bankruptcies to come. In a widely circulated article, the-end-of-history theorist Francis Fukuyama believes that the American image as the world's promoter of liberal democracy has been tarnished by what happened in the mortgage market and its subsequent consequences in the Wall Street. In a restrained tone, he declared that a certain vision, which flourished during Reagan-Thatcher era, has collapsed. That type of capitalism, Fukuyama believes, is centred on three concepts: adopting a low-tax policy, light government intervention and more relax regulation. He reached a conclusion that the solution to the crisis is purely political. With a next Democratic administration in the White House next year, he tacitly hopes, America would reclaim its dream as a financial superpower. __
