has been quite a decade for global corporate leaders,
volatile not only in terms of their actual fortunes,
but perhaps even more so with respect to the shifting
perceptions of society. When the decade began, large
corporations and those at their helm were at the peak
of their power, flush with riches delivered by the
dotcom boom in the US economy as well as the vast
opportunities created by easier access to global markets.
Along with economic wealth came social approbation.
The glorification of business leaders became the norm,
not only in the US and other developed countries,
but especially in "newly emerging" economies
like India, where media and other public celebration
of individual business success was warranted by the
perception that such leaders were crucial for the
overall development of the economy.
Celebration of financial success also meant encouraging
the specific motivation that was seen to drive economic
activity. The unalloyed focus on the material benefits
that capitalism was seen to deliver (at least for
the fortunate minority, if not for most of the world's
population) led to an appreciation of the qualities
that capitalist functioning is based on: individualism
and the competitive spirit.
Capitalism as a system is based on greed, on the harnessing
of individual self-interest to the common good. This
has been known by analysts of political economy for
a very long time. In 1776, Adam Smith's famous and
still widely quoted passage in the Wealth of Nations
noted that "It is not from the benevolence of
the butcher, the brewer, or the baker, that we expect
our dinner, but from their regard to their own interest.
We address ourselves, not to their humanity but to
their self love, and never talk to them of our own
necessities but of their advantages."
More recently, the more famous quotation was probably
that of Gordon Gekko, the fictional hero of the 1987
film Wall Street: "Greed, for lack of a better
word, is good. Greed is right, greed works. Greed
clarifies, cuts through, and captures the essence
of the evolutionary spirit. Greed, in all of its forms--greed
for life, for money, for love, knowledge--has marked
the upward surge of mankind."
The crash of the dotcom boom in 2001 changed all that,
not because any underlying realities were different,
but because the collapse of bubble-driven profitability
forced many accounting worms to crawl out of corporate
cupboards. A series of corporate scandals and failures
rocked the US economy in 2001 and 2002--from Enron
and WorldCom to Adelphi and even one of the top five
accounting firms, Arthur Andersen. It turned out that
much of the much-hyped growth and profits were illusory,
based on fraud and data manipulation, or simply put,
Two points that emerged then are still relevant today.
First, such scams are not new or unexpected; in fact
they are part of capitalism's normal functioning.
Only the most naïve of interpretations of the
history of capitalism would leave out the crucial
role played by fraud, deceit and open crime in the
accumulation of capital and its subsequent use. The
notion that the "new" capitalism is somehow
more open, accountable and democratic, is a false
illusion purveyed by the capitalist media which also
have major stakes in the system.
The second point is that such scams typically emerge
at the end of a boom, or when it is beginning to peter
out. It is not that the scams cause the financial
or economic collapse; rather, they are symptoms of
the turning point, when companies find that profit
expectations are not being met, and try to prevent
or delay the anticipated downturn with whatever means
they possess, including fraud. Thus, while many of
the financial malpractices continued for several years,
they were exposed only when economic slowdown and
the stock market bear trend fed into each other.
For a while after that, there were some attempts at
restraint. There were some widely advertised cases
of chastisement and even legal punitive action against
those corporate honchos who were seen as most at fault,
but they were simply the fall guys in a much wider
system of malpractice. The Sarbanes-Oxley Act of 2002
in the US attempted to make the financial activities
of publicly-listed companies more transparent and
bring in more regulation.
But then yet another (policy created) bubble in the
US--this time directed to the housing market and financial
proliferation--once again diverted attention and brought
back the glory days for risk-loving CEOs of large
companies, especially financial firms. The period
2002 to 2007 thus became, in the US and globally,
a repeat of the earlier 1990s process on an even larger
scale. It was the same dance, to just a slightly different
tune, and joined by many more economic agents all
over the world. Greed and boundless market optimism
were back in fashion again.
The collapse of the sub-prime housing market from
late 2006 indicated that this dance could not go on
for much longer either, even though governments and
markets across the world were in denial for several
months thereafter. By late summer 2008, the crisis
could no longer be averted, and though some analysts
date the beginning of the crisis to the collapse of
Lehman Brothers in September 2008, the actual unwinding
had already begun.
And the current crisis is not over yet. The major
imbalances that were at the heart of the crisis still
persist: the imbalance between finance and the real
economy; the global macroeconomic imbalances; and
the ecological imbalance resulting from the pattern
of growth. The methods adopted to deal with the crisis
have not really helped. Banks that were "too
big to fail" have become "too bigger to
fail". The humongous bailouts have generated
unprecedented moral hazard among financial players
and other companies because they have not come with
Even if collective policies somehow try to generate
yet another bubble, there is clearly going to be more
financial turmoil, and this will mean more financial
scams, collapses and needs for bailout. And the captains
of industry will once again face a bad press and public
Of course, global capitalism has managed to reinvent
itself before, and may well do so again. But whichever
way you slice it, this requires a major change of
course--it cannot be based on business as usual.