Remember those famous words by Gordon Gekko in the movie Wall Street? Well, he’s back. From what I read recently in the Poughkeepsie Journal, they are making a sequel to that movie. It will still feature Michael Douglas as the greedy, conniving, Wall Street stereotype, but brought up to date with the most recent financial crisis. Should be a good movie.
After reading about the sequel, it got me thinking about capitalism in general and the ethics of business in particular. Since I spent 30 years in the financial end of the business world – although not on Wall Street – so I have got some opinions based on first hand observations. Given the financial meltdown of 2008, the bailouts, and the bonuses paid to executives of these failed banks and financial institutions, I thought it might be interesting to discuss whether “Greed is Good” or not.
Without going into a lengthy discussion of my rationale, I believe capitalism is the best economic system. Communism failed. Before it could begin to prosper, China had to move from a rigid communist economy to a blend of a semi-capitalistic economy coupled with a repressive communist government. Since I don’t think those two can co-exist too long, the government will most likely become less repressive.
Socialism has its disadvantages, mainly in that it discourages success, limits innovation, taxes too heavily, and has too much central planning. The ideal for me is a capitalist system with enough controls to protect against egregious abuse, but not so many that innovation and risk-taking are discouraged. A robust capitalistic economy allows for plenty of competition and does not allow too many mergers and acquisitions. The more competition a market has, the better it is for the consumer. With one or a handful of dominant companies in a particular market, competition is not as vigorous and the consumer suffers from high prices, lack of innovation, and often poor quality of goods and services.
We’ll look at whether “Greed is good” in a future post.