Identified: The Weakest Link in Capitalism
Posted: Monday, September 15, 2008
by Mogama
http://www.mogama.info
It's midway through September 2008, and Lehman Brothers has filed chapter 11 bankruptcy already? Wasn't it just last month that Lehman Brothers told the world that they would come out of their seeming troubles just fine? Last year, didn't some executives of that firm earn salaries and bonuses in excess of $22 million? And didn't Mr. Dick Fuld, CEO of that company, earn $100 million in the last three years?
What in the world is going on? How in the world could the world's best economic model get us to this point? What went wrong? Is this really the way Mr. Adam Smith thought capitalism would work?
Capitalism is an economic system in which private owners control a country's trade and industry. Terms like free enterprise, private enterprise, or free market are just other ways to describe capitalism.
The one word that is the driving force of capitalism is profit. Take away the profit motive, and capitalism breaks down, because there would be no incentive for private citizens to take risk.
For the profit drive to remain a good thing, those seeking that profit must be people of character. Integrity is the cornerstone of capitalism that gets a rare mention in the financial news, but it is no less crucial to the success of a free market system. In business school, they call it 'business ethics', and it should not be an oxymoron, though it seems to be just that these days. Without integrity in every important sector of the free enterprise system, there will be no reason for the public to trust the institutions of the free market. And without this public trust, the foundation of capitalism will crack, its pillars will crash, and its walls will crumble.
When the number of honest men and women declines among those who control the engine and wheels of free enterprise, the untamed beast of raw greed leaps out of its cage and takes to the streets. Randomly, that brute beast tears innocent investors and consumers to shreds on its rampage. Sadly, re-capturing renegade, runaway greed is no small task, as we are painfully finding out.
The pushers of Enron, Bear Sterns, Fannie Mae, Freddie Mac, Lehman Brothers, and Merrill Lynch lied to us all. They kept telling us that things were fine just before they declared bankruptcy or begged to be bailed out. To put it plainly, these guys are dishonest. They were and are liars, deceivers. And they deceived investors because of their greed, which saw and knew no limit.
All this reminds us of one important lesson: Capitalism MUST be closely supervised and regulated, because the private controllers in the system are not angels. They are humans, often greed-driven people, who care very little about their clientèle. And they will deceive and lie to cover their tracks. They do not deserve investors' faith and trust. No, we do well to harbor eternal suspicion about these money handlers.
Furthermore, constantly looking over the shoulders of the private controllers of capitalism must be a responsible government that is ever vigilant to hold the wheelers and dealers accountable, and if they insist on blind greed, to make them pay dearly, not bail them out for their despicable money games. What the American government is doing is like handing the oxygen masks to the pilots and crew, while leaving the paying passengers to fend for themselves aboard an aircraft doomed to crash.
Yes, capitalism is a better system of economics than communism and socialism, but it is by no means a flawless system. Greed, coupled with lack of character, remains the weakest link of capitalism. That raw greed must be tamed by appropriate regulation by a responsible government. "Let the free market handle it" just won't fly anymore. The whole system is littered with too many totally selfish financial gurus plagued with the disease of unrestrained greed that craves million$ or billion$, with families left shattered, homes foreclosed, retirement accounts wiped out.
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Top-level comments on this article: (2 total)"The whole system is littered with too many totally selfish financial gurus plagued with the disease of unrestrained greed that craves million$ or billion$, with families left shattered, homes foreclosed, retirements wiped out..."Yes, and this is exactly what Karl Marx predicted.O my gosh, Jennifer! Did I really agree with Karl Marx? Not sure that's a good thing! Didn't mean to. Thanks for commenting, though. ~ Garswa
There is something seriously wrong when company leaders (or country leaders) make millions of dollars while running their companies/countries into the ground. Most people seem to be easily corrupted by greed and power. I agree that regulations by a responsible government are necessary. However, creating a responsible government is also quite challenging. Certainly the current U. S. government which has allowed us to become trillions of dollars in debt cannot be considered very responsible. When the government isn’t responsible, we all suffer the consequences.Well said, Kathy! Thanks for your insightful comments. ~ Garswa
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