Question

The current financial meltdown and mortgage crisis triggered some assertions by some people in some quarters that excessive and uncontrollable greed associated by capitalism is the reason for this crisis. Do you think Karl Marx’s conflict theory supports this point? If so, why?

Answer 1

The conflict theory focuses upon the conflict between the different classes such as a conflict between the factory owners as rick people and workers as poor people due to scarcity of resources and its unequal distribution. So, the mentioned philosopher proposed to apply control by state and apply dominance to establish the social order. But, this theory does not apply, because bankers and borrowers of poor credit rating, both were responsible for the financial crisis. It was the greed of the bankers, acting as a working class people who followed moral hazard and gave loans to people with poor credit rating, termed as subprime lending. These people refused to pay back when the housing prices decreased. It contributed to the financial crisis. Here, the real owners of the banks were the investors who actually suffered as they lost value of the shares and it was the fault of the working class managers and people as borrowers that led the crisis to happen.  Hence, it is not the same as suggested by the Karl Marx as different classes combined together in fulfillment of the their greed and self interest rather than the conflict.