SPIEGEL: Our former Chancellor Helmut Schmidt says it’s all a matter of so-called predatory capitalism. Do you agree?
Wolfensohn: Well, it’s not the system, the system did not drive it. It was driven by individuals, and the individuals created a capitalist system that was full of excesses and not regulated. So it wasn’t because there was a system; it was because individuals took advantage in the absence of appropriate regulation.
SPIEGEL: Has it to do with the American way of doing business, the American way of life, the American dream?
Wolfensohn: Well, your banks — also in their international activities — engaged heavily in this practice and had substantial losses as a consequence of this crisis.
SPIEGEL: But they didn’t invent this business.
Wolfensohn: Avarice is not contained only in the United States. So if something is making money here, it’s very apparent from the reports of your financial institutions and your investors, as well as other foreign banks, that sophisticated investors were investing very heavily in this system. So I give you that it was invented here, but I must say that there were some willing buyers and participants in other parts of the world.
Capitalism and our Constitutional form of government work very well as long as we, as participating citizens, retain a strong sense of obligation toward each other, that is the public weal or common good.
But as soon as individuals take selfishly take advantage of the freedoms offered by capitalism to narrowly focus on their own personal gain of wealth
and/or
selfishly take advantage of the political freedom and liberties offered under our Constitution and Bill of Rights to narrowly and selfishly pursue political goals to the detriment of others,
then,
our economic and political systems become dysfunctional.
And that folks is what has been happening to us over the past fifteen years or so. To some degree, this kind of thing is always occurring, but the events during the last fifteen years have been egregiously ‘out-of-sync’ with our mutual obligations toward each other.
Without the Fed and the incestuous Wall Street/Treasury relationship, speculative bubbles would get popped in pretty short order–that’s what capitalism does. Resources then get transferred from implausibly valued condo’s to things for which there is sustainable demand, and prices fall in the process.
The current correction is not a failure of capitalism. It is a failure of Third Way social democracy.
Bingo, #2.