Its one of those days that could reinforce the skeptics view of the capitalist system. Four of the ten most-read articles today on the website of the Globe and Mail deal with white-collar crime in the U.S. and Canada:
1. Hundreds swept up in U.S. mortgage fraud arrests2. RCMP charge former Nortel executives3. Ex-Royal Group executives charged4. Former Bear Stearns managers surrender
These reports come against the background of a slow-motion bailout of the U.S. financial sector, one bound to end up costing taxpayers billions of dollars while profits earned from creating the mess sit in the accounts of industry executives and equity stakeholders. Furthermore, no measures appear to have as yet been put into effect to alter the incentives to take wild gambles with other peoples money, so the socialization of loses and privatization of profits remains for now the North American brand of capitalism — as Nandu Narayanan describes in his April commentary(Narayanan is a hedge-fund manager whose fund is up more than 130% over the year thanks to short sales on mortgage lenders etc.)
Yet, the optimists might be encouraged by the news reports of greed and skullduggery being exposed and brought before the courts. Capitalism is about seeking profits — but within the rule of law. So enforcement actions tell us the system is functioning as it should (although Canada is still lagging the U.S. considerably when it comes to obtaining convictions). As for the socialization of losses and privatization of gains, once the full extent of the financial-sector bailout unfolds, I believe it is unlikely Congress will abstain from placing curbs on the worse aspects of this inequitable and dysfunctional model.