The Committee to Destroy the World

CHAPTER 3 Capital Ideas

One of the great ironies embedded inside the structure of all complex systems is that they sow the seeds of their own demise. Such is the case for modern economies and bull markets. The collapse of the Western financial system in 2008 demonstrated beyond a shadow of a doubt that there are internal contradictions embedded in how modern capitalist societies organize themselves. The free market mantras that permitted lightly regulated financial industries to conduct business in reckless and self-serving ways over the three decades leading up to the crisis were thoroughly discredited by the need for Western governments to bail out their largest financial institutions.

The seeds of destruction were primarily ideological; they grew out of widely accepted but flawed ways of thinking about capital, economic growth, and financial regulation. Instead of basing economic growth on a modified free market model that privileges concepts such as equity, transparency, production, and prudent and limited regulation, those in positions of influence chose a radical free market path of debt, opacity, speculation, and wholesale deregulation. There were two problems with this approach. First, the United States does not have a genuine free market; government regulation and crony capitalism play an enormous role in distorting incentives and interfering with the free market. Second, this regime was based on the radical error of pretending that markets are efficient and investors ...