Understanding Capitalism
Alain Paul Martin

Regulating to make decent capitalism work is another “inconvenient truth” that will be nothing short of a miracle to pull off. Most Western governments has dug themselves so deep in the misguided path of self-regulation with the virtual acquiescence of political and economic leaders. Even though self-regulation has led to the worst brand of governance, not only in economics but in food inspection, health, transport and nuclear energy; the vast majority of academics and economists still have a flawed conception of capitalism, the sort of anomaly described Noam Chomsky’s “Manufacturing Consent” with respect to the press. Correcting this deeply-held misconception of economics is a daunting but a necessary task that will be met with a fierce opposition. Without understanding the fundamental causes that repeatedly cascade into widespread suffering on main street, economic policy founded on the current dominant neo-liberal Chicago-School paradigm will, at the best, yield short-term recovery and temporary relief, before succumbing to the ravages of another crisis.

To rebuild each nation on solid grounds, a major surgery cannot be avoided to reverse the fast-ticking and global eco-social time bomb. The G20 countries must establish a corridor of navigation to prevent systemic risks that transcend corporate and national boundaries. In each jurisdiction, they must appoint oversight commissioners to play the air-traffic controllers’ role, but let entrepreneurs, not unlike airline pilots, steer their business as they see fit in terms of risk/rewards within the established corridor of navigation. In addition to the external and internal auditors appointed by shareholders to safeguard their assets, and only where systemic risk warrants it, a small team of systemic-risk “watchdogs”, paid by the government, must reside, on a rotating basis, in each large bank and financial institution, as done in nuclear power plants to prevent meltdowns in the aftermath of Three-Miles Island and Chernobyl. This natural evolution to close the systemic-risk loopholes left by Adam Smith’s and John Maynard Keynes’ unfinished and outdated visions of capitalism, is brilliantly addressed by the upcoming book of Harvard’s Professor Bruce Scott titled Capitalism: A System of Governance. The book sheds the light on the flawed economics and beliefs that continue to drive legislative and executive policies and decisions; frequently incubating severe crises with dreadful socioeconomic consequences, increasingly on a global scale. It recommends a host of measures to address the current flows, without specifically proposing systemic-risk watchdogs embedded in financial institutions.