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Can capitalism be ethical?

July 7, 2009

The timing couldn’t be more expedient. Benedict XVI’s third encyclical: Charity in Truth is out, just before the G8 meeting in Italy. As the world economy recovers from an unprecedented slump, ethics, long ignored, will be given prominence. Remember a certain Joseph Ratzinger predicted the global downturn years ago, on the premise that  trading in newfangled financial instruments without ethics was bound to fail. Call it clairvoyance or plain understanding of human behaviour.

“As long as human emotions influence decisions, this won’t be the last financial crisis the world has to contend with. But, most of the last century has been defined by markets that fund innovation, reward entrepreneurial risk taking and act as an important catalyst for economic growth.” [1] As it was in days of Enron so it is today and (hopefully) will be; till we loose our heads again. Don’t get me wrong, I’m for free markets. But capitalism is due  for a overhaul based on an economics that realizes its fallibility; as it is not a positive science like physics. Because of its failures capitalism needs a catechism for a system that endures.

[1] Remark by Lloyd C. Blankfein, Chairman & CEO of Goldman Sachs, to the Council of Institutional Investors Spring Meeting , April 2009

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