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World's financial crisis, bankrupt turning point of the US-type free market economy doctrine
The year-end months of 2008 have seen the start of the financial crises that broke out from Wall Street (the US) with extremely strong velocity. All the dramatic situations with the fierce vortex threatened to cause global instability and economic recession have posed all the complicated problems with no precedents ever created before, so it demands a launch of international-scope co-ordinations, tense debates and costly bail-out plans valued at many thousand billion US dollars inside and outside the US.
This event unprecendented in all these 80 years in the world’s market economy is “a drop to overflow the glass”, toppling mercilessly “the US values” which had from the very first extolled to the extreme its self-adjustifiability of the market mechanism. That fact has rejected the argument that in the market economy, there is no need to have the role of the State and it has to “liberalize the market and privatize the economy” as some one had raised hue and cry about it.
The 2008 financial crisis is revealing the unprecendented signs and situations, marking a down-hill turning point of the golden period of the US free capitalism. If the abuse of the below-the-mark lending (with the US government’s connivance) and the boom of the derived debt instrument in the global financial market, causing the overaccumulation and losing the possibility of payment in the real estate market (this has gone beyond all the predictions and control of the government) are the direct cause, it is these very high free market mechanisms that are partial towards individual and local interests and control loosening in the US are the main and profound cause for the crisis. It is really derisive that all the institutions of the US State have for hundreds of years now encouraged the liberalizstion of the market and the privatization of the economy and yet now in the first decade of the 21st century, an urgent bail-out package of USD700 billion is being used to nationalize all the world-largest banks and insurance firms. FED has decided to set up a special fund to buy back all the trade bills issued by the US businesses; as of August 2008, these trade bills with a value of USD 1,300 billion had been issued in the market. And this measure has been followed suit by a series of countries with developed market economy. On 28 September 2008, the British Government nationalized the Bradford & Bingley Bank with a cost of USD 25 billion. On 29 September 2008, Belgium, Holland and Luxembourgh had altogether nationalized the financial part of the Fortis group, the biggest bank in Belgium. On 6 October 2008, France’s BNP Paribas Bank offically received the control of the shares of Fortis. The German Government also had to have an EUR50 billion bail-out plan to save Hypo Real Estate, while the Government of Iceland has to spend EUR600 million to control the shares of Glitnir Bank to avoid a chain reaction. Japan is also ready to bail out hundred of billions of US dollars to support the stability of the domestic financial market system. A host of global and regional multi-lateral meetings and contacts have continously occurred with the only subject being how to co-ordinate in a common effort to stop the spread and soon get out of the unprecedented financial crisis. On 4 October 2008, leaders of Britain, Germany, France and Italy met in Paris and agreed to sign an official treaty to support the banks in each country. On 7 October 2008 the financial ministers of 24 EU countries sat down to discuss ways to confront the crisis and they had come to an unanimous agreement that it was necessary to use strength and the hands of the State to salvage the financial market, reduce interest rates, raise insurance coverage in bank deposits and force the banks and insurance companies to make constant asset revaluations in accordance with the market price. The Asian governments have also agreed to set up a common bail-out fund of Asia with a value of USD 80 billion to support the member countries in case of any catastrophie.
The fact still shows that the USA is plunging into the financial bankruptcy with incontrollable, easy debts which have long gone beyond the current asset value. The financial fortress as it was lebelled to the US financial system with its ideas of “freedom and democracy” to guarantee the stability in the process of the world’s development is being shaken to the root. “The world’s financial system will become multipolarized” as declared by the German Minister of Finance. The IMF and WB which had once played a central role in resolving the financial crisis in Europe are now no longer able to play that role for the financial crisis in the US. Many leaders in the developed nations have found a common voice, stressing the need for a fundamental solution: To find a new balance between the role of the State and the role of the market. The new thinking about the hand of the State in a changing world has been emerging ever clearer.
The world is embarking on a new economic epoch, the epoch of a market economy with the State’s appropriate regulation with an ever stronger emphasis on enhancing the role of the law, institution and the State’s regulation, further tightening credit lending, setting up a transparent, open information system, developing the forecast and warning instruments and punishing all the errors and frauds. The new thinking about the State’s hands will have been becoming ever clearer, governing comprehensively all the actiivities in all areas of international and national social and economic life.
A new economy of the world is being fixed, so it demands a new way of thinking to be in conformity with the State’s hands of management while implementing the principles of the market economy so as to be able to avoid having any extreme and one-side awareness, intensifying the complete-set co-ordination of all instruments and management levels, keeping close watch and handling in time all the reverse side impacts of the policy selected through reality by the efforts of financial and organisational strength at home and abroad with the State as kingpin.
In the process of undertaking the renewal work in general and in the current anti-inflation combat in particular, the role of management of the Vietnamese State has fundamentally kept pace with the general trend of the world and at the same time brought into full play the strength of the whole political system of the country and thanks to it, it could make a contribution to steering the country’s economic boat in the right direction to overcome a lot of rapids, difficulties and challenges in order to ever more consolidate its position and strength in its international and regional integration. To continue to raise the effectiveness and results in the process of its social and economic development, it is necessary for Vietnam to perfect some of the following orientations and contents:
Firstly, it should respect the objective requirements of all the laws and processes of economic management, all of its commitments in integration and the harmony of all development interests and constantly improve investment environment. It is necessary to raise quality of construction and management in accordance with the planning for social and economic development, infrastructural development, faster and more thorough-going deployment of separating the State’s economic management function from the function of production and business management, the administrative function from the function of public services so as to be able to build a modern, effective and transparent administrative system. On the other hand it is necessary to implement to the full all the market economic principles. Attention should be paid to the volume and timing, support policy when formulating and implementing all the solutions which have been and are being deployed to promote the positive side and reduce the negative side of the chosen policies. More attention should be paid to combating corruption and using meritocracy.
Secondly, importance should be attached to supervising, forecasting, giving timely information, criticising and evaluating the policies in the State management just to help the State managerial agencies to take more initiative actions and raise the operational results higher.
Thirdly, importance should be attached to harmoniously linking the economic development to the cultural development, resolving all the urgent social - environmental problems, raising the quality and requirements of sustainable development.
Dr. Nguyen Minh Phong
Nhan Dan
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