| Free-market capitalism has done a great deal to | | | | markets where mega-corporations operate as |
| make the world the place it is today - both good | | | | virtual monopolies defying the principles of free |
| and bad. But now capitalism is in for a major | | | | and open competition. |
| overhaul. | | | | 2. Products are beyond comprehension: |
| Most proponents of the current form of | | | | In the financial markets, most institutions that |
| capitalism justify it by comparing it with | | | | bought CDO's and CDS's were clearly not aware |
| communism. This assumes that human ingenuity is | | | | of the nature of these products, according to |
| so limited that we have to rely on only two | | | | Michael Lewis in The Big Short. In our everyday |
| philosophies of managing production and | | | | lives, the average consumer does not really |
| consumption. | | | | understand the terms of an insurance or annuity |
| Unless we take the dialog to a higher plane and | | | | contract or a credit card agreement. |
| generate alternatives, we will remain stuck in a | | | | Apart from finances, people have little idea of the |
| system that has reached the limits of its ability to | | | | deadly chemicals that go into many products we |
| serve humanity. | | | | use daily, and we should be concerned at growing |
| I think capitalism has gone off the tracks for | | | | evidence about the harmful effects of packaged |
| three fundamental reasons: | | | | foods as well as medicines. |
| 1. All players are not equal: | | | | The consumer today has no real understanding of |
| Economics 101 taught us that in a perfect market, | | | | what he or she is buying. Many executives running |
| supply and demand are naturally balanced by | | | | companies have no real understanding of what |
| hundreds and thousands of players, relatively | | | | they are selling. In this free-for-all of greed and |
| equal in their power and influence, all with perfect | | | | imperfect knowledge, unregulated free-market |
| information. Monopolies and oligopolies can lead to | | | | mechanisms are bound to create disasters with |
| cartels that that take advantage of the other | | | | increasing regularity. |
| players and lead to imperfect markets. | | | | 3. Too much distance between buyer and seller: |
| In today's world markets, a few big banks have | | | | With the growth of global trade in products and |
| inordinate power and influence. Recently, the U.S. | | | | services, the distance between the producer and |
| SEC levied a $550 million penalty against Goldman | | | | the consumer has increased dramatically. |
| Sachs for misleading investors into buying risky | | | | Producers see their consumers as faceless, |
| securities based on subprime mortgages. | | | | nameless sources of revenue. This distance |
| Mind you, Goldman's customers were not lay | | | | reduces the level of personal accountability and |
| investors like you and me. Their customers were | | | | responsibility. |
| large Fortune 1000 corporations whose | | | | As an example, one of the world's leading |
| sophisticated CFO's who still got misled. | | | | suppliers of genetically modified foods has banned |
| Throughout the markets in recent years, George | | | | its own foods from its employee cafeterias in the |
| Soros has estimated that more than 90% of the | | | | UK, while at the same time lobbying the Indian |
| Credit Default Swaps - worth tens of trillions - | | | | government - directly and indirectly - to allow the |
| were traded back and forth among only 17 large | | | | sale of those foods in India. |
| global financial institutions. | | | | The next version of capitalism - whatever it is |
| When a relative handful of financial powerhouses | | | | called - will need to address these core issues in |
| are so dominant, there is no way the markets | | | | creating a more holistic philosophy to address |
| can be a level playing field for average investors. | | | | human economic endeavor. Do share your own |
| This is true not only for financial markets, but all | | | | ideas on capitalism in a Connected Age. |