Since the advent of free markets, way back in the days of Adam Smith in his famous ‘The Wealth of Nation’s’ treatise, introduced the concept of the ‘market’ being the best model for the economy. The market has malfunctioned on so many occasions, causing much embarrassment to free market ideologues, for this reason a suitable justification was needed to justify how the market was the best method to create and circulate wealth around an economy.

The depression of the late 19th century, the South sea bubble, the great depression of the 1930’s, the recession of the 1970’s, 1990, the dot.com bubble and now the financial crisis are said to be anomalies, just a glitch on the otherwise whiter than white clean track record of the free market. The fact that there has been a crash, bust, downturn, depression or slump every decade since the release of ‘The Wealth of Nation’s’ in 1776, with each being considered once in a life time events which in no way tarnishes the markets apparent track record of unparalleled economic success.

The justification free market ideologues settled upon was the cyclical business cycle. In 1860, French economist Clement Juglar identified the presence of economic cycles 8 to 11 years long. Later, Austrian economist Joseph Schumpeter argued that a Juglar cycle has four stages: (1) expansion (increase in production and prices, low interests rates); (2) crisis (stock exchanges crash and multiple bankruptcies of firms occur); (3) recession (drops in prices and in output, high interests rates); (4) recovery (stocks recover because of the fall in prices and incomes).

In 1946, economists Arthur F. Burns and Wesley C. Mitchell provided the now standard definition of business cycles in their book Measuring Business Cycles: “Business cycles are a type of fluctuation found in the aggregate economic activity of nations that organize their work mainly in business enterprises: a cycle consists of expansions occurring at about the same time in many economic activities, followed by similarly general recessions, contractions, and revivals which merge into the expansion phase of the next cycle; in duration, business cycles vary from more than one year to ten or twelve years; they are not divisible into shorter cycles of similar characteristics with amplitudes approximating their own.”

Hence free market ideologues claimed that due to time and nature all economies go through seasons where wealth is created leading to a boom with much wealth being generated. They considered it an inevitable matter that not all would benefit from a boom in an equal manner and once profits reached a particular level there would inherently be a slow down in economic activity, which was considered necessary by some economists as these would lead to the redistribution of wealth. So from this perspective a crash was necessary when during the ascent of the cycle wealth would not be distributed in equal manner.

Thus after every crash, downturn, slump and recession free market ideologues blame nature for creating the business cycle. In this way the financial crisis currently is separated from the ‘market’ and should be salvaged because there is no alternative.

A cursory glance at the mechanics of Capitalist economies shows the current crisis is part and parcel of the free market and in fact this is a normal process of Capitalism i.e. the financial crisis is the market in operation.

The reason why such crises occur is due to the aims Capitalism attempts to achieve with the economy. The aim of any market economy is to ensure the economy grows every year, perpetual economic growth is the equivalent of the five daily prayers in Islam. The growth of economies is measured by Gross Domestic product (GDP) which is the monetary value of the production of all goods and services in an economy.

For the economy to be practically achieving what Capitalism has laid as its ideal the sectors that contribute most towards the economy must always be growing, as any fall in production in such sector’s that dominates the economy will have the effect of forcing the whole economy to shrink.

In the current crisis the UK economy has a service sector which represents 80% of the economy, the service sector is dominated by the financial industry, to such an extent the financial industry contributes £350 billion to Britain’s £1.3 trillion economy.

Hence in Britain like most Western economies one sector or a handful of sectors drive the economy which in effect are bubbles waiting to burst. This is because when the economy is on the ascent it will always be driven by a one sector which is used to stimulate the remainder of the economy. Once this artificial growth runs out of steam, it causes the inevitable bust. A bubble is aided in its expansion because the ability to print money at will, the want for consumers to spend beyond their means and the availability of debt all contribute towards expanding the bubble.

Economic growth requires the economy to continually grow, which in turn needs consumers to continually spend, the availability of debt allows this on a massive scale. Once consumers have spent beyond their means to such an extent that they realize they probably cannot repay the debt borrowed, a cut in spending will have the effect of cutting off re-fuelling during a flight.

Perpetual economic growth is not sustainable and is what causes the regular crash, in no way is there an act of nature that causes a downturn, this in fact is a cop out by free market ideologues when the free market fails.

What is needed is an alternative system that does not place economic growth at all costs as the aim but rather places the needs of people as its aim.