Capitalist crisis – what should be done?

By Don Tapscott
Posted on : 25th April 2010

The book is a delightful and stimulating read by two of today’s best business writers. Throughout, they take insightful deep dives into the history of capitalism, from the 1720 credit crunch in England to today, showing how the system has been built on constant crises. With a fresh view that is hard to categorize, they dismiss free-market fundamentalists such as Ayn Rand or Arthur Laffer, along with left-wing advocates who argue that markets can do no good.

They conclude there are five mistakes we must avoid making: Believing that bubbles are wholly negative; that governments should avoid bailing out the financial sector; that crises can be solved without addressing underlying economic causes; that an economy will always naturally recover on its own after a crisis; and that the solution is simply a rush to more regulation of financial markets.

Bishop and Green applaud the spirit of creativity. The predictable bubbles and crashes that result are part of a learning process, and we shouldn’t, warn the authors, throw out the innovation baby with the recklessness bathwater.

In addition to the wonderful review of economic history, the book is strongest when it presents four big ideas to shape this new and improved capitalism: Rethink economics; redesign global governance; put values back into business; and promote financial literacy. They advocate replacing the dollar with a new world currency, and for a new set of business values, blaming the crisis on “toxic ideas” rather than “toxic assets.”

Bishop and Green stop short of laying out a comprehensive blueprint for change. However, clearly we’re in early days of this debate and enormous change lies ahead. By painting a rich historical tapestry and providing startling insights into how economics needs to recognize the complexity of human behaviour, they have made a powerful contribution to get us off a road that is indeed surely ruinous.

Read the original review at Don Tapscott’s blog.

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