Capitalism’s New Clothes

MELBOURNE – Is the global financial crisis an opportunity to forge a new form of capitalism based on sound values?

So French President Nicholas Sarkozy and former British Prime Minister Tony Blair appear to think. At a symposium in Paris last month entitled “New World, New Capitalism,” Sarkozy described capitalism based on financial speculation as “an immoral system” that has “perverted the logic of capitalism.” He argued that capitalism needs to find new moral values and to accept a stronger role for governments. Blair called for a new financial order based on “values other than the maximum short-term profit.”

It is surprising how readily politicians of all parties – even strong ideological defenders of the unregulated market – accepted the idea that the state should bail out banks and insurance companies when they got into trouble. With the exception of a small number of ideologically committed defenders of free enterprise, few were willing to take the risks inherent in letting major banks collapse.

Who knows what the consequences would have been? Many feared mass unemployment, a tidal wave of bankruptcies, millions of families evicted from their homes, the social safety net strained to the breaking point, and perhaps even riots and a resurgence of the political extremism that brought Hitler to power in Germany during the depression of the 1930’s.