CAPITALISM IN CRISIS: The Broken Pact with the People

[Purveyor]

By Dirk Kurbjuweit

Trust capitalism and shun government interference we were told. But irresponsible bankers saw a chance to get rich quick and went for it. Their failure has become ours -- and the promise of a common good has evaporated along with faith in democratic capitalism.

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Poker for the Politicians; Blackjack for the Journalists

At the same time, Economics Minister Michael Glos is conferring with the heads of German companies. Here as well everyone is deadly serious, solemn and concerned. The atmosphere on board this Airbus is enough to imbue an observer with confidence: Germany seems to be in good hands and the problems can be solved.

But we could also paint a very different picture. We could throw out the rows of seats and replace them with gambling tables, poker up front for the politicians, roulette in the middle for the corporate executives, and blackjack in the back for the journalists. Everyone has taken off their jackets and loosened their ties. Beads of sweat have formed on some foreheads and tension fills the air. Nobody wants to land. They will play until they crash.

Would this picture be entirely wrong? Or does it contain a kernel of truth?

One thing is clear: The world seems to be teetering on the brink of disaster because a few people have been on a big-time gambling binge. They have lost their stake on bad loans and now banks are collapsing, companies are facing a liquidity crunch, investors are losing their savings and a recession is looming.

This time around, though, there is more hanging in the balance than just the cyclical ups and downs of the economy. This time fundamental issues are at stake. Is a market economy nothing more than an invitation to engage in excessive gambling? And what about the democratic principles that are so closely linked with the market economy, a concept that was used by the West to achieve dominance over the world? This vision of democracy is also at risk.

Suddenly, everything seems possible. Nobody knows which banks will suffer a meltdown and what will be the consequences for the real economy. Nobody knows how big a risk the Wall Street gamblers have taken. That’s what makes the situation so frightening. It’s as if we were riding in a small dinghy on an African lake. They passengers know that crocodiles are lurking in the water, but they don’t know how many there are, nor can they determine the size of the beasts.

Welfare for Banks

Now the challenge is to keep people from losing all faith in the markets, to prevent panic from erupting. Success here also depends on whether the actors and observers of global events -- company executives, politicians and journalists -- take things seriously or whether they too are basically just gamblers.

These days, it is hard to recognize the world as we thought we knew it. A large number of American financial institutions have sought protection from the state, and now the US government has taken action to keep the country’s entire financial sector above water. An entire country, Iceland, threatens to go bankrupt. In Germany, Finance Minister Peer Steinbrück has had to save Hypo Real Estate in a hastily organized bailout operation, and Josef Ackermann, the CEO of Deutsche Bank -- a man who was once a high-flying champion of capitalism -- has been calling for the government to launch a rescue package, which is paramount to providing welfare to banks.

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SPIEGEL ONLINE: http://www.spiegel.de/international/business/0,1518,583007,00.html