14
May

Capitalism 2.0

Written on May 14, 2007 by Max Oliva in Development

J.Pozuelo-Monfort, MSc candidate in economic development at LSE.
Jaime PM.jpg
There are two financial centers in the world. There is Manhattan in New York. There is the City in London. Then there is the rest. Nothing measures with New York and London in terms of finances. Nothing messes up with Manhattan and the City, not even Tokyo, Shanghai, Hong Kong or Dubai, not even.
Finance and the financial markets are the lungs of a breathing industrialized world. Finance and the financial markets only make possible that this current version of the world based on capitalism 1.0 work. Finance and the financial markets make the whole idea of credit work. A whole idea only a few are able to grasp because without finance and the financial markets the current world such as we know it and are familiar with would simply not exist.
The current developing world has been incapable of accessing the financial markets as the first world has. The current developing world is far from reaching the financial markets because of a lack of rule of law, because of a lack of property rights and basic rights for long term investors to be confident their investments are secure and in good hands. Put microcredits and the work of Hernando de Soto to work together and a different picture might emerge.
London is the emerging financial capital of the XXI century, a global city in the social Europe of the second globalisation era, a social Europe that must for its own sake and that of its member countries, depart from the demode neoliberalism that Thatcher and Reagan once made popular. A social Europe that is in the difficult position to reconcile the more neoliberal understanding of the economy of the United Kingdom, with more social models rooted in Germany and France.
Finance and the financial markets only make our life easier. But finance must turn more social as well. In a globalized world where information is diseminated at the speed of light not one single firm can remain unaccountable for its lack of ethics, not one single firm. Credit is the key. Everybody loves credit, everybody needs credit. Those who are in charge of allocating credit are in a key position to determine the fate of capitalism. Those who are in charge of allocating credit need to enforce systematic and rigorous underwriting rules and give up the lax lending to either unethical or otherwise corrupt firms and institutions.
And the marketplace needs to penalize those firms that grant credit according to relaxed criteria. And perhaps we might then contemplate the beginning of capitalism 2.0. The world deserves better. The world awaits challenging times that will definitely set the path of a new set of rules in this game that only favors a few in expense of many worse off.

Comments

Gibran Armijo May 29, 2007 - 12:50 pm

I couldn’t agree more, Capitalism 2.0 is just another name for what I called “Social Capitalism”, or Mark Benioff’s “Compassionate Capitalism”, or Muhammad Yunus’ vision of the Social Enterprise or Entrepreneur. It starts as a seed in each sector, in your case, Finance, in mine, Information Technologies, in my wife’s case, Medicine… and it WILL expand to all aspects of our society, from Education (the primary root), through Politics and Law.
We are fortunate to be living in our times, where we are reaping much of what others have sowed for so long now, along with our own input, knowledge, experience, renewed energy, clarity and determination… it all is coming together under a very ripe moment and environment.

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