The Current Financial Crisis and the Legitimacy of Capitalism

Overview
The current financial crisis has raised questions about the legitimacy of capitalism. Ethi cal failures certainly played a role. While it remains to be seen whether and how many people blatantly broke the law, there are abundant signs of various forms of potentially unethical behavior. These include greed, unreasonable amounts of le verage, subtle forms of corruption (such as ratings agencies that appear to have had a conflict of interest), comple x financial instruments that no one really understood, and herd behavior where people just followed along and failed to exercise independent judgment.
It is difficult or impossibl e to regulate against greed and against many of the other ethi cal shortcomings that have been seen. What can be done is to force greater transparency and accountability, a process which began with
Sarbanes-Oxley and is expected to continue with new regulations of the financial system.
Context
Drawing upon learnings from t heir work and experiences, the panelists and moderator exc hanged views with the audience on the ethics and legitimacy of business and capitalism in general, and the financial crisis in particular.
Key Takeaways
The financial crisis may shift societal views on the legitimacy of business.
Each panelist offered a different perspective on the issue of ethics and legitima cy in business:
The financial crisis has the potential to damage the legitimacy of capitalism (Di Tella).
Richer nations tend to be more right-wing in their views and have more capitalistic economic systems. The United States is exceptionally right-l eaning, even among developed nations. These attributes are heavily influenced by beliefs regarding the reasons why people are prosperous or poor. Americans tend to see prosperity as a product of effort more than luck; left
-leaning nations believe the opposite. Affecting these beliefs: the number and severity of the shocks a society has w
eathered;