Financial deregulation started the madness
They rode the Reagan revolution and called themselves the Masters of the Universe. Within a few years of financial deregulation, the massive Savings & Loans scandal erupted in America, prompting credible analysts to start questioning the excesses of unbridled capitalism. But then, the Berlin Wall, followed by the disintegration of the Soviet Union and Fracis Fukuyama declared the ‘end of ideology.’ Capitalism emerged as the triumphant alternative while pundits got busy writing obituaries of Marxism, Socialism and even plain common sense Pragmatism. The merchants of capital literally started ruling the global economy by literally causing hundreds of billions of dollars to flow out of one country into destinations that became the latest fancy. Good old fashioned hard work, manufacturing and thrift became objects of derision as the West thought it could leverage consumerism forever to lead an unstainable lifestyle.
Some Asia economies tried to follow the same model and were pulverised by the East Asia crisis of 1997. At that time, pundits and financial wizards in New York and London lectured the Asian economies on how to implement capitalism in the best possible manner. It was a matter of time before the mania for unbridled capitalism and complete freedom to financial markets and instruments created a Frankenstein’s Monster. Fancy words like sub-prime mortgage, LBO, Junk Bonds and CDOs became accepted vocabulary even amongst those who were skeptical of this sustained defiance of common sense. And then came the day to pay the bills when the ‘great’ Lehman Brothers went bankrupt.
They rode the Reagan revolution and called themselves the Masters of the Universe. Within a few years of financial deregulation, the massive Savings & Loans scandal erupted in America, prompting credible analysts to start questioning the excesses of unbridled capitalism. But then, the Berlin Wall, followed by the disintegration of the Soviet Union and Fracis Fukuyama declared the ‘end of ideology.’ Capitalism emerged as the triumphant alternative while pundits got busy writing obituaries of Marxism, Socialism and even plain common sense Pragmatism. The merchants of capital literally started ruling the global economy by literally causing hundreds of billions of dollars to flow out of one country into destinations that became the latest fancy. Good old fashioned hard work, manufacturing and thrift became objects of derision as the West thought it could leverage consumerism forever to lead an unstainable lifestyle.
Some Asia economies tried to follow the same model and were pulverised by the East Asia crisis of 1997. At that time, pundits and financial wizards in New York and London lectured the Asian economies on how to implement capitalism in the best possible manner. It was a matter of time before the mania for unbridled capitalism and complete freedom to financial markets and instruments created a Frankenstein’s Monster. Fancy words like sub-prime mortgage, LBO, Junk Bonds and CDOs became accepted vocabulary even amongst those who were skeptical of this sustained defiance of common sense. And then came the day to pay the bills when the ‘great’ Lehman Brothers went bankrupt.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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