Can Capitalism as a system cope creatively with unfolding calamities and absorb sudden shocks? Is there a need to critically and creatively challenge prevailing economic assumptions? These questions, among others, have been frequently asked in recent months. These questions are vital and deserve appropriate answers. This is not only because the current financial crisis is severe and has led to unexpected catastrophe, but also because after the collapse of the Soviet Union, some voices within the capitalist world assertively claimed that capitalism was the only unflawed economic system. These voices blindly and aggressively glorified selfishness and subsequently placed it ahead of any social or moral considerations.
The catastrophic consequences of the current financial crisis and its dramatic rapid engulfing of the world have induced experts, within the capitalistic camp, to rethink their assumptions and challenge certain economic pillars. Indeed, at least three major voices within the proponents of the free market economy have emerged. There are those who believe that corruption and deficiencies are embodied in capitalism itself and that either there is nothing that can be done about it or vigorous regulatory mechanisms must be put in place to deter or punish wrongdoing. Gordon Brown (2009), Britain's Prime Minister, vividly expressed this opinion stating, "As we have discovered to our cost, the problem of unbridled free markets in an unsupervised marketplace is that they can reduce all relationships to transactions, all motivations to self-interest, all sense of value to consumer choice and all sense of worth to a price tag."
Others question the ability of capitalism to cope with emerging challenges resulting from globalization, fierce competition, and the complexity of a larger market. Those voices, including Alan Greenspan's, seem to imply that there is a need for revolutionary changes in the fundamentals of capitalism. That is, the principles of a free market may sound fine but in practice and in a complex world they lead not only to wide-spread deception but to outcomes which are inherently contradictory to their primary assumptions. The third stream of thought calls for a new partnership between government and the private sector. The nationalization of banks and other financial institutions which took place, for example, in the U.S. and Britain in late 2008 and the infusion of huge public funds in an ailing economy and in institutions are just the beginning of this trend. The advocates of this approach underscore the severity of the crisis and suggest that nationalization is a short-term strategy and by no means a substitute for a vital and fruitful cooperation between the state and the private sector.
The validity of any of the mentioned approaches is impossible to verify without applications. Nevertheless, it is certain that these approaches, despite their sound perspectives, ignore one fact; capitalism and socialism systems, in their variations, have all produced outcomes contrary to their professed intentions, and in practice both systems have led to disappointments, be they inefficient distribution of wealth, concentration and abuse of power, limited access to opportunities, or thriving corruption and fraud. Worse, in many situations, like in Russia, Indonesia, Thailand, and some democracies, this has led to the emergence of powerful groups who have influence and can pull strings; the oligarchs (Johnson, 2009).
Handy (1999) rightly recognized that under both capitalism and socialism there is always uncertainty. He argued that socialism has a 'heart' but lacks mechanism, while capitalism has mechanism but lacks purpose. This proposition, though controversial, has its merit. Proponents of both systems claim that their corresponding system optimally serves mankind and provides workable mechanisms for allocation of resources. Do these claims practically produce fruitful results? …