| The US mortgage crisis has seriously challenged | | | | education by removing subsidies in these sectors. |
| the idea of laissez faire (free market) economies. | | | | In a nutshell they were to require their populations |
| What was once regarded as the soundest and | | | | to pay for these services. |
| progressive economic model is now suffering a | | | | To ensure that third world governments |
| crisis of confidence. No one seems to have the | | | | committed to these programs; aid, grants and |
| answers. | | | | loans were to tied to how successful a |
| The free market economic model in a nutshell | | | | government was in implementing these programs. |
| dictates that a government must not interfere or | | | | The US and Europe followed suit and tied their |
| be involved in any economic activity. On the other | | | | financial support to commitment to SAP's. |
| extreme end you have communist economies | | | | The argument then was that the free market |
| where government owns, controls and directs all | | | | economic model was the only route to economic |
| economic activity. What is important to note is | | | | prosperity. We now know better given that since |
| that no country is fully capitalist or communist. | | | | 1978 China's GDP has grown an average 9.9 |
| Most countries are mixed economies defined as | | | | percent a year. China's per capita income has |
| capitalist or communist depending on how far | | | | grown at an average annual rate of more than |
| they lean either way. | | | | 8% over the last three decades, drastically |
| In the early 1990's the World Bank and | | | | reducing poverty. It is now almost unanimous |
| International Monetary Fund (IMF) came up with a | | | | amongst economists that the SAP's nearly |
| series of programs known as Structural | | | | destroyed third world economies. In fact, most |
| Adjustment Programs (SAP's) designed to help | | | | countries have since abandoned them completely. |
| third world economies spur economic growth and | | | | What is going on in the US and now Europe is an |
| get out of poverty. | | | | example of what runaway, unbridled, unregulated |
| The main thrust of these programs was:o Third | | | | capitalism can do. The US $ 700 billion bailout plan |
| world economies were to liberalize their | | | | recently passed by congress is a slap in the face |
| economies, that is, sell state assets and | | | | of what used to be sound economic policy. The |
| corporations to the private sector. In other | | | | events in the US and Europe should serve as |
| words, governments were asked to reduce their | | | | wake up call to all; that the best economic model |
| involvement in economic activity and become free | | | | is not necessarily the laissez faire 'hands off' |
| market economies.o Reduce public spending mainly | | | | model but rather that countries should strike a |
| by reducing the workforce on government payroll. | | | | balance between the capitalist and communist |
| Third world governments were forced to | | | | models. China appears to be doing rather well. |
| downsize their work force significantly. They were | | | | Being too far on one end clearly has its hazards. |
| also required to reduce spending in healthcare and | | | | |