Time Out

This week I have carried out a broad analysis of the role of capitalism in financial crises throughout history, focusing on crises from the Tulip Mania in the 17^th century to the recent 21^st century crash.  In early crises, capitalism seemed to liberate animal spirits and give rise to speculative bubbles as investors clambered to capitalize on the waves generated by market liberalization.  Yet recent crises, such as the Asian crisis or the 2008 crisis, also suffered from bubbles suggesting that sophisticated investors may profiteer by ‘riding the wave’ at the expense of society more broadly.  Furthermore, many of the crises have also been prolonged or exacerbated through government failure, in particular the Great Depression, Asian Crisis and recent crisis.  This suggests that government should be cautious about deregulation, given the phony financial behavior it tends to generate in a greater grab for profits.  It also highlights the conflicts of interest policy makers may face, and the potential for crony capitalism.

Next week, as mentioned in my last post, I will focus on the future of capitalism in its current form.  As it is the last week of my blog, I will also give an overview of my findings and examine their implications.