This has been quite a decade for global corporate leaders, volatile not only in terms of their actual fortunes, but perhaps even more so with respect to the shifting perceptions of society. When the decade began, large corporations and those at their helm were at the peak of their power, flush with riches delivered by the dotcom boom in the US economy as well as the vast opportunities created by easier access to global markets.

Along with economic wealth came social approbation. The glorification of business leaders became the norm, not only in the US and other developed countries, but especially in "newly emerging" economies like India, where media and other public celebration of individual business success was warranted by the perception that such leaders were crucial for the overall development of the economy.

Celebration of financial success also meant encouraging the specific motivation that was seen to drive economic activity. The unalloyed focus on the material benefits that capitalism was seen to deliver (at least for the fortunate minority, if not for most of the world's population) led to an appreciation of the qualities that capitalist functioning is based on: individualism and the competitive spirit.

Capitalism as a system is based on greed, on the harnessing of individual self-interest to the common good. This has been known by analysts of political economy for a very long time. In 1776, Adam Smith's famous and still widely quoted passage in the Wealth of Nations noted that "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self love, and never talk to them of our own necessities but of their advantages."

More recently, the more famous quotation was probably that of Gordon Gekko, the fictional hero of the 1987 film Wall Street: "Greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms--greed for life, for money, for love, knowledge--has marked the upward surge of mankind."

The crash of the dotcom boom in 2001 changed all that, not because any underlying realities were different, but because the collapse of bubble-driven profitability forced many accounting worms to crawl out of corporate cupboards. A series of corporate scandals and failures rocked the US economy in 2001 and 2002--from Enron and WorldCom to Adelphi and even one of the top five accounting firms, Arthur Andersen. It turned out that much of the much-hyped growth and profits were illusory, based on fraud and data manipulation, or simply put, lies.

Two points that emerged then are still relevant today. First, such scams are not new or unexpected; in fact they are part of capitalism's normal functioning. Only the most naïve of interpretations of the history of capitalism would leave out the crucial role played by fraud, deceit and open crime in the accumulation of capital and its subsequent use. The notion that the "new" capitalism is somehow more open, accountable and democratic, is a false illusion purveyed by the capitalist media which also have major stakes in the system.

The second point is that such scams typically emerge at the end of a boom, or when it is beginning to peter out. It is not that the scams cause the financial or economic collapse; rather, they are symptoms of the turning point, when companies find that profit expectations are not being met, and try to prevent or delay the anticipated downturn with whatever means they possess, including fraud. Thus, while many of the financial malpractices continued for several years, they were exposed only when economic slowdown and the stock market bear trend fed into each other.

For a while after that, there were some attempts at restraint. There were some widely advertised cases of chastisement and even legal punitive action against those corporate honchos who were seen as most at fault, but they were simply the fall guys in a much wider system of malpractice. The Sarbanes-Oxley Act of 2002 in the US attempted to make the financial activities of publicly-listed companies more transparent and bring in more regulation.

But then yet another (policy created) bubble in the US--this time directed to the housing market and financial proliferation--once again diverted attention and brought back the glory days for risk-loving CEOs of large companies, especially financial firms. The period 2002 to 2007 thus became, in the US and globally, a repeat of the earlier 1990s process on an even larger scale. It was the same dance, to just a slightly different tune, and joined by many more economic agents all over the world. Greed and boundless market optimism were back in fashion again.

The collapse of the sub-prime housing market from late 2006 indicated that this dance could not go on for much longer either, even though governments and markets across the world were in denial for several months thereafter. By late summer 2008, the crisis could no longer be averted, and though some analysts date the beginning of the crisis to the collapse of Lehman Brothers in September 2008, the actual unwinding had already begun.

And the current crisis is not over yet. The major imbalances that were at the heart of the crisis still persist: the imbalance between finance and the real economy; the global macroeconomic imbalances; and the ecological imbalance resulting from the pattern of growth. The methods adopted to deal with the crisis have not really helped. Banks that were "too big to fail" have become "too bigger to fail". The humongous bailouts have generated unprecedented moral hazard among financial players and other companies because they have not come with adequate regulation.

Even if collective policies somehow try to generate yet another bubble, there is clearly going to be more financial turmoil, and this will mean more financial scams, collapses and needs for bailout. And the captains of industry will once again face a bad press and public hostility.

Of course, global capitalism has managed to reinvent itself before, and may well do so again. But whichever way you slice it, this requires a major change of course--it cannot be based on business as usual.

December 23, 2009.