The Govt's Role in Stabilizing the Global Economy: A Look Back at 2008 - Essay Sample

Introduction

The financial crisis that hit the world in 2008, leaving behind a significant trail of destruction on the global economy. The situation could have been much worse if the federal government did not take control to help manage the situation. The measures instituted by the government helped to control the menace, and this is why I believe that the authorities should always play a key role in ensuring that the markets are being regulated. The government should have an influence on what is happening in the economic systems, the media, federal bureaucracy, social contract, and globalization.

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Economic Systems

Economic systems cover the measures through which the government distributes commodities with the aim of controlling the production factors. There are many activities that FED can undertake to manage the economy and this include regulating the lending process. The government has a role of instituting measures that will ensure that banks are not offering risky loans. Measures in the lending process should be tightened to ensure that the chances of borrowers defaulting the loans given are low. The government should adopt policies that only allow loans to be advanced to persons that are employed and can settle their debts. However, this regulation may reduce the rate of economic growth since this will reduce the money in general circulation (Farrar, & Parsons, 2019). Allowing the movement to institute their regulations may lead to a slow rate of growth, but the economy will be stable.

Media

Media has a role to play in the occurrence of the financial crisis, and this means that it should be regulated to avoid a future occurrence of a similar situation. The primary role that media plays is to influence people and the way that they are likely to react when they receive news of an impending crisis. Fake news should be regulated, and the media should be barred from giving information that is not genuine, for it can trigger massive losses and collapse of an economy. For example, a media unit can state that a given bank is on the blink of bankruptcy, and the issue may lead to a bank run where shareholders withdraw their deposits in large quantities lowering the amount of money for running the normal daily operations. However, regulating media may have its adverse effects, such as investigative media may find it hard to conduct their activities despite their role in helping to unearth the wrong activities happening in the market.

Federal Bureaucracy

The federal bureaucracy consists of commissions and agencies that form the American Government backbone, and this branch should be regulated to ensure that it does not influence the issues happening in the market that can lead to a crisis. There are times that politicians engage in activities that are for their benefit and not to support economy growth. In such cases, the American government should regulate the issues that the politicians can tackle on matters relating to the economy (Yuan, Fan, & Jin, 2017). The move will ensure that the economy is protected, and there will be no personnel that will provide uninformed news on matters about an economy.

Globalization

Globalization is a process that has enabled the trading process on an international scale, enabling companies to sell their commodities throughout the world, and it can trigger a financial crisis. Therefore, the government should have control over its exports and imports to make sure that there is no occurrence of a situation that can trigger a credit crunch. The globalization process may be preceded by the removal of controls on financial market innovations and international capital flows, and this may lead to unprecedented growth in stocks and foreign assets flow (Grosse, 2017). Therefore, the government should ensure that it is managing the amount of funds that are flowing in and out of the country as a measure of regulating the credit level.

Social Contract

The social contract concept calls for the need to live by the acceptable moral standards in a society. The government should have control over the measures that are undertaken when managing the relationships that exist between the various players in the market. Having this control will ensure that all stakeholders are working towards the realization of a common goal, which is to ensure that there is stability in the financial market (Trappel, Gadringer, & Wenzel, 2016). However, the adopted measures may trigger adverse effects, such as the inability of the economy to open up for investment and potential growth.

The federal government should take an active role and ensure that it is regulating the financial industry, for this will help in preventing the occurrence of a financial crisis. Some of the policies that may be adopted to curb the menace may trigger the occurrence of adverse effects. However, the benefits that will be realized will outweigh the negative outcome, and this is an indication that the federal government should have control over the economic systems, run the globalization activities, and media to avoid fake news leaking to the public. Bureaucracy should not be allowed to influence the performance of the financial industry, considering that there is a possibility that some of the players will be acting for their interest.

References

Farrar, J. H., & Parsons, L. (2019). Financial stability after the global financial crisis: Globalisation, nationalism and the potential demise of a rules-based order. In Scholarship, Practice and Education in Comparative Law (pp. 81-111). Springer, Singapore.

Grosse, R. (2017). The global financial crisis-Market misconduct and regulation from a behavioral view. Research in International Business and Finance, 41, 387-398.

Trappel, J., Gadringer, S., & Wenzel, C. (2016). Media policy and regulation in times of crisis. In European Media Policy for the Twenty-First Century (pp. 107-129). Routledge.

Yuan, Z., Fan, C. L., & Jin, Y. (2017). Media monitoring, crisis public relations and enterprise performance. modern enterprise (Cochran and Wartick, 1988; Wu Jinglian, 1999; Zhang Weiying, 1996), 10, 12.