Fixing the Greed of Capitalism

Unfettered greed arising out of the free market capitalistic system is at its worst as we have seen in recent times. Bernie Madoff, a former chairman of the US NASDAQ stock market operated the biggest PONZI scheme, the biggest investment scandal in history. He has swindled thousands of investors of US$ 65 billion. On June 29, 2009, he was sentenced to 150 years in prison, the maximum allowed under the US law.

The 2008 United States financial crisis led to global financial meltdown which evoked fears of another Great Depression like in the 1930s. In this most recent financial crisis that started in the the US, Investment banks and commercial banks lent trillions of dollars for housing purchases to borrowers ill-equipped to repay when the housing prices crashed. There was no 'invisible hand' espoused by Adam Smith to maintain a fair and just order in the market. The driving force of the present free market model - at least in the US is Milton Friedman's theory that business corporations are only to make profit and greed is part of the equation.

With the emerging economies of China, India and Brazil fast catching up with the developed world, there is growing pressure for a new economic world order. Can the Western liberal free market capitalism co-exist with the economic styles of the emerging economies?

Below is an interesting discussion in Davos 2011, on the future of the Business Enterprise. Now we are going back to the roots of business that Adam Smith would have envisaged. Once again business leaders have raised the issue- social responsibility of business corporations is critical to rein in the corporate greed. Business needs to create more than just one value-i.e.,profit for the shareholders.

The new mantra for developing countries that need the assistance of the world financial institutions like the IMF seems to be: public/private sector partnership.