Week 1 assignment Management Essay Research Term Paper

Global Financial Collapse of 2008
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Global Financial Collapse of 2008
The economic impacts of the global financial crisis in 2008 could not be explained by the traditional economic theory. The nearly collapsing financial system resulted in long-term effects on the worldwide economy. Most countries suffered for many years before getting back to their feet in terms of economic stability. Although the crisis spread worldwide, the developed countries found positive ways to restoration while the developing countries faced a lot of challenges through the battle to gain stability. The struggle pushed various countries to create and follow better theories in explain and solve the crisis since the governments could not withstand the failures in the economy. “Since the 2008 crisis, there has been increasing interest in using ideas from complexity theory to make sense of economic and financial markets" (Battiston et al., 2016). Hence, while the traditional economic theory resulted in the crisis and it could not be used in the development of a plan to solve the commercial failure, resulting in the adoption of other paradigms such as complexity theory in the process of regaining stability.
Although the complexity theory has remained efficient in the process, aspects and concepts such as networks and resilience entered the financial regulation lexicon, resulting in significant financial crises in the global economy. Hence, the crisis hit the global economy more than anticipated or even as it should not have. The experience in the financial crisis gave governments the insight and potential to come up with better techniques in the management of such issues In the future. Although they do not hope for the events, they anticipate faults in the financial markets and systems, and making preparations for the management to maintain substantial economic status is ideal. Having economists deal with the issue is not an ultimate solution to the prevention of crisis since most people in the markets are striving to succeed, and they can eventually do anything to achieve their dreams. For instance, in the description of moral hazard, entrepreneurs, and investors in the United States indulge in significant risks knowing that their government will always chip in to help (Khan Academy, 2008). On the other hand, the government does not gain any reward, and all the profits go to the individuals taking risks.
The bailouts in moral hazards not only affected the United States but also other countries across the globe. How did the issues become a moral hazard? For example, people getting into risks expecting the government to bail them out caused the crisis in the economy since the only thing the governments do is giving out while they do not gain anything from the profits realized. Hence, although the act of helping individuals might have been termed as the responsibility of the government, it resulted in the financial crisis due to a lack of balance between the resources gained and used at the end of disposal. On the other hand, Kahn 2008 argues that most people in the global population ...