The free world economy owes its success to capitalism. However, capitalism itself comes in several different varieties, based on local culture and socio-economic mores. The Anglo-Saxon model of capitalism is believed to be the original form of capitalism. While it originated in England, the Anglo-Saxon model really became famous because of the growth of US Economy. In fact up until 2000, when the dotcom bubble burst, the American style capitalism, i.e. the lightly-regulated Anglo-Saxon capitalism, was seen as the economic model of the future – one which countries should aim to emulate if they were to achieve long-term economic stability. (Fukuyama, 2011)
The Anglo-Saxon model works on the idea that providing high in incentives to finding work reduces the pressure on the state to grant welfare packages. The economy supports free trade, product pricing is entirely determined by the market and has an autonomous monetary policy. The market failures are not thus addressed by providing welfare support to people, but by injecting additional market elements to bring it back on track. (Bronk, 2000)
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However, the turn of the 21st century has brought in one economic crisis after another; the dot-com bubble was followed by the much severe sub-prime crisis in 2008 that actually sent the global financial reeling. While several of the economies are slowly regaining their foothold, IMF has stated that the growth might never return back to pre-crisis levels. Much of the world now actively blames the crisis on the Anglo-Saxon model of capitalism, as it is practiced in the U.S. (The Economist, 2009)
Interestingly the Anglo-Saxon model purported to have a moral code, boasted of liberalism and touted itself to be free from the evils of state control. However, in the last 15 years, America not only squandered its fortune but also managed to severely tarnish its image. One only has to recall the mechanism of artificial bubbles created due to dot-com and later the housing market that can be directly traced back to greed – both personal and corporate – brought about by the very problems that state-controlled economies have – the need to gain more. (Fukuyama, 2011)
- Bronk, R. (2000). Which model of capitalism? OECD Observer, 221(22), pp. 12-15. Retrieved October 27, 2014, from OECD Observer Web site: http://www.oecdobserver.org/
- Fukuyama, F. (2011, January 17). US democracy has little to teach China. Retrieved October 27, 2014, from Financial Times Web site: http://www.ft.com
- The Economist. (2009, October 1). Market fatigue: The Anglo-Saxon model has taken a knock. Retrieved October 27, 2014, from The Economist Web site: http://www.economist.com/
