Crisis? What crisis?
October 29, 2008
But let us turn around the reasoning here: Society cannot be successful if its businesses fail. This seems to me irrefutable. Just tell me what country is successful without a shining private sector. Extending this logic, one could argue that society must regulate in such a way that is best for business. Just to be clear, business is quite different from individuals that lead businesses or substantially determine their course (through excessive risk taking, for example). And to be even clearer, this means a different regulatory regime than we currently have, because it is individuals that have profited whereas both the large masses of employees and shareholders are suffering.
The problem with this reversed (admittedly capitalistic) logic is that it is the politically incorrect thing to say now. But to paraphrase Warren Buffet here: be more positive about capitalism when people denounce it and be more critical of it when people cheer it on. Over the last ten years we have advocated companies to look at their performance in a different way. When the markets were cheering them on we tried to help them with critical introspection and broad perspectives. Likewise, we would now advocate that society has to be careful not to shoot itself in the foot by swinging the regulation pendulum too far. If society cares about and financial and environmental and social performance to improve, count on the private sector to make it happen.
Yes, there have been serious flaws about how companies have behaved. But it is easier to point at the clearly irresponsible behaviour of a limited number of (business) people, than to look at the incredible but not always easily visible benefits the private sector has achieved for many. Markets are able to integrate much more information than governments ever could. And it is primarily through markets therefore that capital, resources and people will be most optimally allocated.
A caged lion may be fun in the zoo but it will not play its role in the economic eco system. Likewise I am convinced that overregulation more damaging than under-regulation. The price we pay for overregulation is high in comparison with the opportunities that will be left unrealised. The tragedy however is that it may feel as if we are paying little relative to the fresh scars of the crisis. Solve the current crisis therefore without hurting business’ long-terms prospects but be more critical of business when the tide is up again.
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