Essays on Free Market Fundamentalism Assignment

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The paper "Free Market Fundamentalism" is a graeat example of an assignment on macro and microeconomics. The article, “ The God that Failed: Free Market Fundamentalism and the Lehman Bankruptcy by Ferguson and Johnson (2009), debunks the idea that everything was just fine with the economy until Paulsen and Bernanke went to Congress and got the government involved. There are two very important themes running through this article and which revolve mainly around the government-controlled free market economy and that with no government involvement. The author is correct and compellingly clear when they point out that letting Lehman fail was the main contributing factor and a turning point in the financial collapse, with significant implications on the price of credit and markets among others. The counter-argument as presented by Cochrane and Zingales is that allowing Lehman’ s bankruptcy was appropriate and in the spirit of creative destruction, which they argue, is vital for free-market capitalism.

For them, government involvement and the resultant bailout funds were the main triggering factor or precipitates to the fall of Lehman. They argue that this was a clear breath of the free market principle citing other failures and bailout like other big companies but not limited to AIG, Fannie Mae, and Freddie Mac, and Washington Mutual. However, according to Ferguson and Johnson, the explanations offered by Taylor, Cochrane, and Zingales is not exhaustive or rather not convincing.

Secondly, the authors specifically argue for the Keynesian — and Roosevelt an implying that the involvement of the state is the surest and essential for economic stability. Although the authors are right in their argument for a state-controlled market economy, this does not mean that the opposing argument cannot be wished away.

The two protagonists arguments however merge with a common consensus for the free market and a clearer line between the collapse of Lehman and associated effects of the crisis on new economies based on the global markets. For Ferguson and Johnson, the fall of the Lehman Company triggered a negative impact on the liquidity capital markets of developing countries, world markets, hedge funds, private investments, as well as negative effects on the credit default swaps, interest rates among other things. If viewed with a keen eye, the crisis from the perspective of the two views may have been prevented in one way or another.


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