(Instructor)April 18, 2013A Critical Perspective of the 2007/8 Financial CrisisThe 2007-2008 Global Economic down Turn was a unique economic challenge that has ever engulfed the world since the great World Great Depression of 1929-1934. It started in United States of America and spread to the other parts of the world (Petrovic, 2010). The origin of this recession can be traced to; easy credit conditions from financial institutions that encouraged high-risky lending and borrowing, international trade imbalances, real estate bubble, government fiscal policies in terms of revenue and expenditure. Because of its far reaching repercussions like the threat of collapse of large financial institutions, bailout of banks by national governments, downturns in stock markets, sky rocketing of commodity prices and the persistent decrease in value of many economies’ local currencies against major currencies and in many areas, the housing industry got almost crippled.
This made economists and financial analysts to try and diagnose the root cause of it and the possibly make a suggestion on what ought to be done to avert or deter the resurgence of another economic crisis of such magnitude. One of the Economists who have written about this is former Nobel Prize William Joseph Stiglitz.
In His book ‘The Free Fall’ he clearly writes about how negligence and greed by the banking industry players in the US led to a worse economic crisis in the World than even the World Great Depression of 1929 to 1934 which also hit the world over. In an excerpt from his book ‘Free Fall’ (2010), he clearly indicts organization strategies as ruthless, profit motivated instruments and of management being complicit agents of capitalism at least within the financial cycles whose only motivation is abnormal profits regardless of the means employed. He also argues that in order to enhance effectiveness in the business industry and the general performance of the whole economy, the market should be self regulating through the market forces of demand and supply and the way of managing risks should be done in a sober manner and efficient organizations will survive while the less competent will be outdone from the industry by the most efficient firms and that customer will always be the final arbiter. A critical consideration of the above argument can be made in terms of: culture, motivation and strategy.
Also on how power is exercised in organization in relation moral values. Organization culture can be defined as a set of beliefs, norms and values within a particular organization. It is this organizational culture that often defines a given firm’s goals, and objectives. Rodrcik (2009) describe organizational culture as a set of shared mental assumptions that guide interpretation and action in organizations by defining appropriate behaviour for various situations. From the above definitions, it can be agreed that, different organizations have different organizational values, visions, norms, working language, systems, targets and habits.
In some cases, the culture of a company is defined by the top management and other employees merely being objects of executing it. In relation to Joseph Stligz arguments, it can therefore address that prior to the Global Financial Crisis, the culture of most financial institutions was so (and may be is) so skewed towards profit maximisation at all cost and this led to an economic abyss of its own magnitude that seven years later many economies are yet to make an economic come back.
It can therefore be asserted that were it not because of a deep entrenched culture within the co-operate world of always ‘money first’ and other things later, this economic down turn will been avoided. This is a dangerous culture which must be stopped at all cost. To stop it is not an option but a moral duty of instilling a sense of responsibility and decorum in a free market economy.