Neoliberalism and The Housing Market Crash - Jadyn C

Neoliberalism is a theory of development often supported by conservatives in America which promotes no government interference in the market. Applying neoliberalism to the fullest extent can lead to large economic crashes as a result of the lack of regulations. The application of neoliberalism is what caused the US housing market crash of 2008. Since the US financial sector did not have many regulations in place, banks and loaners were able to make poor decisions that resulted in a large economic crash. The Financial Crisis Inquiry Commission Report describes the cause of the crash in this way: 
The sentries were not at their posts, in no small part due to the widely accepted faith in the self- correcting nature of the markets and the ability of financial institutions to effectively police themselves. More than 30 years of deregulation and reliance on self-regulation by financial institutions, championed by former Federal Reserve chairman Alan Greenspan and others, supported by successive administrations and Congresses, and actively pushed by the powerful financial industry at every turn, had stripped away key safeguards, which could have helped avoid catastrophe. 
The quote speaks to how the lack of regulations and safeguards on the US marketplace allowed for it to spiral out of control. This example of neoliberalism in the US financial system shows how the absence of government presence in a part of the economy can have major negative effects. This is why it is important to have a balance of regulation and freedom in the market. To achieve this balance, adopting a practice such as the one outlined in the Washington Consensus is helpful. The Washington Consensus' encouragement of a free market within an accountable government is a good way to ensure a relatively stable and productive economy. This is because not only would the market be free enough that the consumers would be able to affect it, the government would also have enough control and responsibility to make sure there would not be another catastrophe like in 2008. Overall, neoliberalism is too extreme of a method to apply due to its encouragement of an absent and unaccountable government. However, mixing some of the principles of neoliberalism with a more controlled method of governing the marketplace can be the most beneficial solution to having a strong state economy.
Works Cited
“The Financial Crisis Inquiry Report.” Government Information, Authenticated U.S. Government Information, 25 Feb. 2011, www.govinfo.gov/content/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf.

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