Capitalism's High Noon

Europe's Enron-induced schadenfreude is kaput. Last year's Vivendi and this year's Parmalat scandals have seen to that. Europe, like America - indeed, like the entire capitalist world - must now become more hawkish in demanding prosecution and punishment of bosses who loot their companies.

American prosecutors in the Enron case have made important progress lately, with some important crooks, like Andrew Fastow, offering both guilty pleas and a willingness to testify against their former colleagues. Mr. Fastow will go to jail for ten years; those he testifies against will face even longer sentences.

Italian prosecutors seem zealous to make those who looted Parmalat pay a similar price. But these cases go beyond the companies robbed and the shareholders betrayed. What is at stake is no less than the perception of the fairness of the market and political support everywhere for market-oriented policies.

Capitalist economies produce inequality, often large ones. Up to a point, and to the extent that income differences are due to differences in ability, effort, investment in education, etc., they are necessary to providing the correct incentives to invest, work, innovate, and grow.