Dear Prof. Peter Palms,

if you can clarify why do you blame the "Fiat" money for this whole debacle? I really don't get this right in. In fact, all the reserve currencies like the $ and the euro are fiat money-backed by govt. decree. Is not this 'fiat' money and particularly the dollar backed by taxes(that you pay)? And if one remember, fiat money was once the cause of hyperinflation during WW1(Weimer Germany)? so where is that inflation gone when you are saying that its all the Fed infused "fiat" money which is the root cause of US debacle? It's delation out there. And Stagflation(a misnomer) for Japan.

Had not the Fed Reserve(Mr. Bernanke) backed up the faltering banks with those bailout funds, what would have become of the American corporate scenario? Will that be too realistic to abolish the Fed system?

ANSWER:Chain of contagious default and further bank runs.

I think, the real problem lies with the Federal Funds Rate and that's not moving up since there is no inflation target. The policy rate is misused and is being misused.

So, if fiat money money do induce inflation, forget hyperinflation, why there is no inflation out there? probably the answer lies in growth. And the policy makers are up in arms to kill growth-whatever little remains there.

And abolishing the Federal system? that's i think..wow..a bit crazy idea.

Thanks for your explanations. That sounds very interesting, yet belligerent.

I will definitely go through that book in part. Not having it now at this moment.

But the debate cannot be overruled. The central banks are all conceived on the notion of sea-farers or mariners, which are intended to fish out troubles, and which indeed, runs the risks of turning into cartels. Their functions as we know relate to control of monetary transmission-emission-remission and setting policy rates, as well, target inflation or act as a lender of last resort. But the policy mechanisms that they follow are highly based on the basic mechanisms of New Keynesian monetary theory i.e., Taylors rule etc. Yet the policy mechanisms that they are following are naked political pandemonium.

I do agree.

Indeed, monetary control is undoubtedly a new world weapon, but to say it in such a paradigm of weapon of mass destruction would be sarcastic! The intricacies of policy rate targets are often covered approach, as evident from Alan Greenspan’s legacy and followed by Dr. Bernanke, when he raised the Fed Funds Rate to 5% by mid of September 2007, from a historic low of 1% in June 2004 which started it all and we know that. In fact, the FFR rate was at 3.25% in January 1992 as it stood at 3% till September 1993. And from 2% in December 2002, that came down to 1% (fostered credit boom, See Garry Gorton, 2008) in June 2004(I have studied this in some detail). The US Fed kept the policy rate indicatively low during the period of 2002-03. And then gradually, it reached 5.25% at the mid of September (17th) 2007. This caused reactionary adjustments in ARM mortgages and bubbled troubles. My question is, why was such a decisions taken and why the foresight was lacking even-though they knew there were so many things pegged to the FFR rate? So, is this not an “irrational intervention” in Fed Fund rate?

Secondly;

And then, since you are a staunch believer of free market enterprise as I do as well, do you not think that it would have been a rational decision to bailout Lehman Bros and all those in the line of fire of default to avert systemic crisis (September 15th 2007)? The Fed is pumping billions of dollars as of now, what stopped them then?

So, what I intend to say, instead of abolishing such institutions, some regulatory institution should be in place to monitor the functions of the Fed Reserve and Central Banks. Well, necessity causes inventions to conceive, one institution gives rise to the foundation of another one and so on, indeed, that is a chain of govt. bureaucracy in a nutshell which you may definitely argue. But the point is, do we have any other option? Dismantling of such foundations, as you have already mentioned, is a herculean tasks and neither recommendable.

Well, taxation is both a weapon as well a policy instrument, and hence, the source of Federal income. And also, does not the direct taxation transfer wealth from the rich to the poor? The Republicans are shouting against raising the corporate taxes, indeed that may hit businesses hard. But the Democrats see this as a way of shielding the elite corporate and business, as well, impediment to generate revenue. Where is the dilemma?

But Sir, I may quote, that if there is high inflation, it erodes both the wealth of the rich and poor. So, if some alternative to tax income is not there, abolishing such would be irrational, I think. But what I intend to say or relate these episodes to the current fiscal doldrums is the very beautiful representation of Wesley Mitchell’s Business Cycle Theory, conceived some 90 years ago, which is all but, the cyclical interrelationship between all macro, non-stationary variables to that of the FFR rate, even well before Keynesian economy. Indeed, there is some impact of changes in interest rate cycle using FFR, as a non-stationary variable effect on business and economic cycles. Since these variables are interdependent, a change in one variable generally induces a change in the other, or the economy as a whole. If you turn the history back to say some 30 years or so, you may discover some changing behavioral tendencies in the FFR cycle in order to identify periods of insensitivities, dynamicity or both (Reagan was good!). Now, why does that happen? The answer perhaps lay in Human intervention, cyclical changes in consumption patterns, greed, corruption, industrialization, power-shift politics and all others that you quote (war, petrodollar).

What we are observing is the natural (manipulated) course of business cycle fluctuations (or here indeed, induced by human maneuver of policy rates), and hence, we perceive zero rate today. Sir, I think it is these policy rates and monetary instruments that cause business cycles to fluctuate, and we get to suffer what is destined for us. This is but in response to fluctuations in businesses, profits, employment, demand, sticky wages, supply and all other coherent micro factors. There seems to be a tough war between macro-vs-micro factors of the economy, the micro being played by (us) and the private free enterprises, while the macro devised by monetary theorists(the govt.).

And I here presuppose, the importance of macro-economic institutions stems up in parallel. So, regulating the functions of the central banks as like the SEC which regulates market players can be a viable alternative.

The New World Order as you have mentioned, would perhaps strengthen the arms of policy makers for covert actions, but its all power-play politics and economics, and I am not into it directly. What I am into, is, perhaps some simple economic theories and how it can reshape our economy, monitor monetary transmission as well, accrue to general welfare. Nobody desire some ghost economy as it is now much evident (China’s export sector ruling us) with stagnant growth and zero rate policy practices by the Central Banks and hence, If you can suggest, what are the other alternatives to deal with such bureaucratic hegemony?

And you have not mentioned about one more Cartel Sir, the OPEC. And now do you think and justify the speculative volatility in crude oil price which already has induced near hyperinflation in the developing countries? Is OPEC not a cartel too?

So indeed I see you have a point, but I think some more debate is required and I am not able to digest the "dismantling" view of yours, even-though if you have some reasons, particularly since the Brettonwood and the demise of the gold standard, govt. money is all but backed by some (naked output?)or Piggybacks and that is the problem. They can print any amount of money (without growth!) so they wish (to stimulate growth?) and pass on to as loans extended through IMF/World Bank or the Fed. So I was asking, if they are printing so much of dollars now, there is still not enough inflation in the US, then, where is all those money going?

I think Lehman should have been bailed out using this "Fiat" money. Don't you have a view of this?

Let me tell you something else, and might relieve some of your concern. Your frustration seems to stem not from political pandemonium, but “corruption” that is plaguing every other country. Those who have the money will win the election, by just a couple of votes regardless of the campaigns, from (Fed )money printing (for buying unique sophisticated voting machines) and all that. Regulate via third party overseeing Fed Reserve decisions, runs the risk of countercyclical hegemony! Who knows, yet I may be wrong.

So, there must be some alternative economic theory-where the definition of socialization should change.

Well Dr. Palms, i still have had a different view about the origin and establishment of the New York Federal Reserve Bank. I read a book called "The New Work Federal Reserve" earlier. I am reading the book by Edward Griffin...that's shocking, but never new he wrote just these things in his book 'The Creature From Jekyll Island'.

What he claims that the Fed was created following a secret meeting at the Jekyll island by a handful of business tycoons and many among them were philanthropist.

what i understand is that the Fed was created to cut down the activities and monitor Wall Street and counter wealth being concentrated in a few hands. that was ok, but the author claims that there was a secret Federal government-private partnership with the biggest banks of those times (JP Morgan, Rockefeller and others)who really backed up the idea for their own benefit. well, this part sounds tricky.

The author often confuses human rationality as he mentions in the beginning about the true motive of establishing the Federal Reserve, and then later says that if we are to reverse the whole process, that would take us back to the age of cave dwellers. Yet he speaks about constitutional money.

why would they(Rockefeller and others) do that and put their own feet under the mud? They did these for a purpose and so, Fed is serving some purpose. If the central banks wouldn't create money who would create it-common man or business people (Think about the debacle about Liberty money!)

I believe not all business persons are "Dragons" sucking money. There are some "Paragons" too amongst them.Indeed, there were,are and will be as many of those as philanthropists and true altruists. They are human beings after all! The problem arises when some of them become corrupt.

You cannot blame the whole system because of just a few handful of guys going wrong way in the Wall Street. Those were the misadventures of innovation-there was no oversight and regulation of such deals where illiquid real assets were being traded as wind and air -backed assets(ABS and CDS) in the liquid market. Things happen and so we learn.

The pure reason for critique which might solve the problem, and perhaps which originated this debacle is the lack of "patent enforcement in the financial sector". Now the time is ripe enough to check those tricky innovations and confer patent rights to the righteous so that these exotic instruments gets public in the right manner, franchised and regulated. similar to one who ideal things that are in place in the pharmaceutical sector.

But what's most tricky in that book and captures one's imaginations is-

the creation of money out of nothing (literally debt) that generates further countercyclical debt. Well Sir, i think the banking principle runs on this simple notion of creating $9 credit from $1 real money, but he considers that particular $1 as elusive. can't say this is a conspiracy theory, or things plotted rather, he claims that he is NOT speaking in the wind! So even if he is correct, the truth is not crazy, rather cozy.

if we observe the present scenario, we find that the Fed failed miserably to contain the crisis and the Federal govt. did not have much idea about these swanky deals (or did they, who can tell) as trading real assets in the liquid markets backed up by complex derivative instruments. Actually, lack of law enforcement and regulation generates corrupt practices but it is impertinent to blame innovation and the art of creation of the finniest instruments. Scientific endeavor cannot be blamed, their practitioners may indeed go wrong.

Consider this- around $65 trillion is traded as debt in the derivatives market as leverage-and the world output stands at $65 trillion in 2010. That means dismantling the whole financial system and the science of credit money. So this sounds tricky too.

And my last question-if the author really meant what he said, the Fed is a Cartel and was conceived on the notion to aid the big banks, then during the financial crisis of 2008, why didn't the Fed started to bail out Bear Sterns, L.Bros and many others and let them to die? Were these not big investment banks too?

Yet indeed, the book is interesting and one should read it. I may be unknowledgeable rather humble, but i must praise the author for his ingenuity, craftsmanship and great foresight that he smelled something fishy long before these events took shape-that's his achievement.

When a poor man loose money, he has nothing more to loose. When a rich man looses, he may have more. But when a common man or woman loose money, she has but a few options to (mortgage) derive money-by credit. And when that credit turns to be a trap, there lay the real pain...Perhaps the author meant it so...

US economists should immediately use the corrective measures; the system(Ecnomic) has imbalances between productive and unproductive items. Now they have more unproductive items comperatively to productive items. The productive units are paying for the unproductive units in very large number.

1) at this level and in this economic situation both empirical evidence and logical economic nexuses show small sensitivity of real output to changes in ST actual federal fund rates, so we cannoct expect any dramatic impacst, bu the ST impacts may be as follows: The goal of FED is to show its effort to solve current economic situation (unemployment, instability, lower growth, ...) --> financial markets immediately perceive this information as a ST signal assuring enough liquidity and support for financial markets and it will definitely lower money market interest rates and at least rates of relatively liquid (or ST-MT) financial instruments, with its subsequent effects like growth of SE indexes or lower rates for US bonds. The next impact is ST depreciation of USD (supporting US exports), lower interest rates in money markets and lower rates. After a few days...when comparing real and nominal interest rates.... we have to come to the conclusion that sources for liquidity do not have real base in the economy. The effect is through announcement of the Fed.... But it does not solve the real cause of curent situation

2) To be successful, the FED would have to declare its long term goals and tools, because the ST rate is only one factor when agents are deciding about future (inflation tenses, SR rates in the future)

3) Transparency and independency would help agents to create their expectations with lower degree of uncertainty - also a key component for LT investment decisions

4) Of course US inflation can disperse to other countries (bond markets, reserves of national banks, investments all over the world....) and the final inflation rate measured by CPI will not be that high, additionaly lower economic activity (aggregate demand) leads to lower prices given the same money supply - moreover not all the offered money gets to the real economy, they stays very often within the financial systems to secure its stability and a real effect is not through the rate but through the stability caused by calming down markets. That is why this measeure - even though it is not the best or ideal one - is much better than QE... distorting the real economy much more and it means buying of ineeffective instruments, only pumping money into an economy cannot solve the problem, this way would be definitely through an inflation (visible or invisible)....I would like the choice to borrow knowing that in case I am broken someone will pay for my debts.....(Someone has to pay for it... but who and how.... every solution represents cost and benefits....)

Hi Slavek: good analysis, but i have something more to point out. you mention Fed will lower interest rates. empirical evidence shows that US is already at the lowest bound FFR rate but you can talk about liquidity, that's different. Pumping liquidity and infusing capital is not helping the economy that is plagued by multiple disasters all machined due to wrong and exploitative policy of the Fed(wrong decisions). Tell you what the Fed would plan for the LT. They would devise more borrowing programs, print more money and lend to the Congress. They are afraid to modulate ST rates. They are yet to fantasize inflation target (there aren't much inflation either).

There (the Fed's) main objective should rather lie to strengthen the banking system and support the real economy for which they have a definite role. Well, you are talking about a dead man walking-the US exports. They have killed the beautiful essence of US manufacturing that was once considered America's pride, but have become their envy and China's pride. I agree greatly to your last proposition that only pumping money into an economy cannot solve the problem (that's that's... the economy harder)!

So, Fed policies are not that impeccable and going for more QE is what they have a few options amongst many choices. Things turned out really bad as you may turn back to history following the Great Crash of October 1929. Things turned out to be worst in 1933,there were a lot of propagandas, counter-blamings and all sorts. Keynes saved the day! That was investment in the real economy and now where are those money pumped by the Fed ending up? Into those banks that created piles of debt and then defaulted and are now up in alms and down in toes. That's impeccable!

Hi, thank you for your response. Only one short comment to the first paraghraph: I did not mention that Fed will lower IR, I only said that the decrease in FFR would -among others- could cause lower ST rates on money markets (interbank bid/offer rates, IRS...) in the SR. These lower rates show the better availability of liquidity for banks/fin. institutions on money markets (=financial markets for ST "money" where financial institutions take part )....So by this measure the FED can partly improve the "liquidity issue" (sometimes only temporary.... And of course there are many other consequences...) and it does not have to be the same as pumping a lot of money directly to the real economy...Thanks for your interesting opinion and good comments

Salvek: sorry if you haven't mean such. But this worth the real excitement and to look further deeper in to the issues that has confronted economist and policymakers with every turn of a business cycle-boom-bust-recovery. And following every recovery, there emerged the dangers of the real effects of the policy measures that often back-fired.

Given the US macroeconomic trends in the ST, some point of reference could be added to the discussion. Its not that the US is having this sort of instability for the first time, it happened before as we remember. First let us consider the years of instability say post-war from 1952-1965 when the industrial production rate showed a rising trend and the GDP growth rate stood at 2.5% while the unemployment hovered around 6%. In fact, the unemployment rate went up to 7% by 1961 and then came down to less than 6% in 1962. There was a robust growth in the industrial exports sector (following a mild recession of 1960-61 in the USA) and that started to expand and which got stabilized high up further by 1962. The consumer price index was still lower compared to UK and taken the base price index of 1953=100, which stood at 110. Now the reserve and liabilities showed remarkable diversion. By 1962, the short term liabilities (external debt) were still above $20 billion while the gold stock started to decline. Between 1960 and 1962, capital investment just declined once (in 1961) and then showed a rising trend to the tune of $80bn, the trend, which was remarkably and closely followed up by business inventories (similar trend). Although the production and output was still moving up again, unemployment rate remained above UK but inflation and rise in consumer price was much less than that of UK for this entire period.

Then there was the Vietnam War the cost of which put pressure on the US economy and then followed by the oil shock of 1973-1974. Between the periods of 1969-1976, there were three mild recessions and a major one from 1973-75. The scenario was of one such double digit inflation followed by 9% unemployment rate. Though USA’s real GDP growth averaged @4% from 1969-75, US GDP contracted by 14.5% during the 1973-75 economic crisis (by about $850 bn). There was some evidence of slow or low housing demand and industries tended to under-invest given the (ROI

Dr. Palms,

you have provided excellent analysis and discourse of the current situation, yet I have some opinion on the above. I attempt to underline with a short discourse, based on your above analysis.

Rethinking Capitalism and Democracy

1. Introduction

Politics is a normative science of organizing human actions, thought and judgments. It is by virtue of policy practices that shape politics and gives it a constitutional form, the norms which are laid down and deliberated by a body or a system comprising of laws and regulations which originates from the collective ideologies designed, and hence based on the nature of the populace that is both diverse and heterogeneous. It has a purpose. The purpose gives it the power to deliberate norms and ethics which the populace should abide to achieve those purpose. When the different parts of these collective ideologies combine it creates a constitutional unity.

Aristotle1 has said in his treatise ‘Politics’ that ‘a republic state much inclines towards democracy’. Now to define the meaning of democracy, one would require understanding the definition of Republic first, that Plato has defined.

The fundamental form of Democracy is Liberty-

If one says that the present form of democracy is a great variation from what it was before, and for what it was destined, then it may be well presumed that this sort of constitution is a ‘Rule of the few' (riches) as against the ‘rule of all’ or ‘rule of the common. This sort of variation defines oligarchic aristocracy which is indeed oligarchy and hence, just the opposite of democracy. Oligarchy as referred in Aristotle’s philosophy as the opposite of the constitutional form of democracy. So as a matter of fact reverting to the current context, its the quality of democracy that has deteriorated. Yet, one may be compelled to ask, where rests the apparent fault?

2. Where is the fault?

This deterioration stems from the distortion in human desires and intentions which guides morality. This distortion implant kernel of corrupt practices neither which democracy nor any rational political ideology endorse. Human intentions and desires govern what we want to do and achieve as well how we want to do and achieve those which are but, procedural compared to the formal that we call substantive. Here, I presuppose that this ‘How’ is depended on ‘what’, wherein ‘what’ is an independent variable. Within this classification of ‘what’ that determines things we desire, intent to do while ‘actions’ dictate ‘how’ to fulfill those desires. Hence, the problem of actions being distorted cannot be ruled out, since, motivated actions are required to accomplish certain goals, as well, goals would not be achievable without certain actions. Hence, the rules or laws that guide human actions need to be flawless, but have limitations. Human ‘desire’ by nature is unlimited and grows by the necessity which is temporal. On the origin of social equality which is as old as the history of mankind, as Aristotle has said, ‘Democracy originates from a common group of populace with some definite causes’.

That definite ‘cause’ reverts back to Liberty- and perhaps to counter oligarchy of aristocracy. To understand it better, this necessitates recognizing the dimensions of human activity and of factors that determine those dimensions. Human actions are varied and evolving. Psychological theories specify that representations for actions are shared by several individuals and are different from recognizing self-produced actions. Consciousness of actions that specify internal representation of goal and of means to achieve that goal depends on intention as a conscious desire to something, purposefully. The aspect of human consciousness is related to the awareness of both external and internal realities. But not all actions are goal intensive and yet, those actions are determined by rational choice and framing of decisions. From pre-historic cattle-breeder, agriculture, and craftsmanship to the modern era of trade and business, dimensions of human activity have been defined by the necessity of the times. Business is a ‘community service’ in that sense the process by which we organize ourselves to perform economic activities and by which we accrue benefits, accumulate capital and hence wealth. The modern system of democratic constitution has no role to dictate the limits of capital accumulation as of ‘how much of that wealth one may accumulate’, but has set some laws to prevent illicit accumulation of capital. It is thus pertinent to say that democracy can survive without capitalism but capitalism may not survive without democracy.

3. The paradoxical fight:

---“My goal is perhaps no different than yours. My desires have a commonality, my wants are not just mine, yet I want to live a good life, have all those necessities fulfilled, gain social status and be affluence in health, wealth, knowledge and vigor, and so are yours”.

For this to achieve, humanity through the passé of time have devised social systems that we believe is optimal, and have laid down norms that would guide us in our steps toward achieving such, and often discarded one system in favor of another, only to discover some imperfections that crept up whenever human rationality have been breached. Democracy has stood the test of the times through its virtues in Liberty. But now that is challenged.

We are social today in a sense where we have common feelings, shared beliefs, collective goals, public consents and open directives. This liberty highly contrasts from the basic precepts and principles of Marxist philosophy. Considering Marxism, we may not even have the opportunity to desire on our own since our liberty and hence our freedom would remain confined. And the things that would be granted to us would not be by our own choice and what we would receive in reality is not that which would have been determined by our free will, but by mandates decreed by the state politburo masked by Marxian norms that eventually kill the very essence of liberty. Communism dictates us to keep aside our dreams, forget about our desires, fear about speaking out and abandon personal freedom.

So, in essence, we cannot deny the benefits of a free market democracy whose attribute is capitalism outright in haste, without taking into consideration the fallacies of the same. We cannot retreat to the age of the cave dwellers neither can we move back in time, our thoughts shape our future of which we dream about a common order-for all men and women are equal, and hence equal under law.

The great fallacy is that, we are by ourselves, committing a crime against the essence of humanity, against democracy, a crime so dreadful that it paints its mark at every turn of the moment, in most corner of the alleyway that we dwell in, a blotch that cuts deep enough inside our conscious minds and there it again, questions us to think about what good our future may offer. We cannot deny about the benefits we accrued from Science and modern technology which is immense, its outreach far, but allocation sparse.

The real fault lies in allocation of knowledge, whether technical or procedural, outside the great barrier which allots it to the one who deserves the most while indeed justified, but not to the one who really need for the most part. We are all born with equal abilities and it’s our environment that dictates and directs our efforts. That environment is by itself limiting which has created a barrier, and resulted in inequality. Inequality in knowledge distribution results in inequality in wealth capital allocation and hence creates poverty and hunger in this world of affluence.

4. Critique for a reason:

Capitalism has taught us to live in affluence, Democracy has taught us to adapt in scarcity, but we are yet to learn to live in parity. By those efforts that I mean would help blossom our inherent abilities, to employ the potential energy that we all have in us. Remove the barrier, and the environment will change. And that would change the way the environment directs our individual efforts. It’s only effort that matters and creates the notion of “having not” and “having enough” and fills the gap. This is a real cartel and should be demolished. This will also demolish the notion that those who have better access to the sources of knowledge will perhaps have better access to wealth, and vice versa. So this is a cartel- a barrier so big and delicate that only the more knowledgeable really acknowledge, the less remain disillusioned and the rest deprived.

The strongest evidence for the causes of social inequality is the lack of knowledge equality in our society which stems from distorted implementation of democracy. If knowledge development and education is transmitted via cartels as it is being done in the present case, it would create a violent form of social inequality which would, in no time, give rise to social volcano. Many parts of the world and many regions are experiencing this form of inequality while there runs already a huge gap in income distribution among different sections of the society. Poverty and hunger is widespread in Africa, Asia and parts of Latin America wherein Public discontent in the USA in one form of silent revolution like ‘Occupy Wall Street’ have led people to gather in common and protest in general against this terrible form of inequality where the 1% of the top earners earn more than 50% of those average combined. This huge gap in national income distribution is believed to be due to the failure of Capitalism to address such problems where oligarchic aristocracies have replaced the true essence of democracy. Capitalism is now being accused for protectionism of the wealthy, and apathy for the deprived.

The real differences arise as of, how to divide opportunities fairly and equally. Here, the definition of “fair” is equivocal. Democracy further augments the path to that process that ensures how one may assume efforts to live with equal rights. It is not a measurable variable, yet it can be felt. When we say that, “by sharing knowledge it grows, so would it be rational enough to ask that by sharing wealth it would grow?” Nay, but by real analogy which is, by sharing wealth it does not lessen the collective wealth of a society with respect to personal. Capitalism cannot share things, but can intend to do so? What would be the consequences then? The notion that expansion leads to affluence and contraction to misery is appallingly the fundamental doctrine of trade and businesses, and of industrialization. So, Democracy is a mean and capitalism an option, but not the only option. The world is now seeking at any other option by which we can share our economic activities fairly, since, fairness in human actions and thought cannot be forced upon by law or decree! That would destroy the quintessence of personal liberty. Capitalism has a straightforward answer to this; “You earn by your own virtue! You are valued by your own actions and effort, by wit and judgment- so why share my fruits of labor when I compete but you evade? Don't be pedantic...”

So in this sense, capitalism is not entirely pessimistic neither at all nihilistic. It encourages us to bring in our efforts concerted and united by the virtue of democracy and reap the fruits of labor which in practice, is a share, and that allocates the virtuous with virtuosity, the ablest with bless of materialism and the worthy the worth of her efforts, but not to those who sit on their luck and lick the passing winds of success. Conducting business in a democracy is to maximize our own values and hence to maximize the value of others who are by part, elements of the whole process. Yet, one thing here differentiates all other suppositions-equality of opportunity. I have mentioned it before that a Cartel has crept in as a barrier that is the root cause of inequality of opportunity.

5. Conclusion: The final answer?

But as also, to say that capitalism has the last and final answer to the great cause of human suffering, inequality, poverty and ignorance is a necessary evil. It is one of the attributes of Democracy. Businesses gain from democracy, but seldom exercise acknowledgment in return. This version may be termed as a form of capitalism without rulebook. Our own nature do not dictate us to seek for profits or avert losses, it is by our own disposition through rivalry that we learn to master the tricks of facing uncertainty and secure profits-else, businesses will perish and with that, capital as well! Democracy has given us a domain of human freedom where rules are designed so that in someway, it provides us with equal opportunities, but it did not specify how to manage our accrued profits-neither do capitalism. Human beings have not lost rationality and money is not an evil, the uninhibited lust for it is indeed. It is hence pertinent to say that Democracy shapes the former (rationality), but rather questionable to cite that capitalism shapes the latter (lust and greed). So a new order may be assumed or thought about. There may be perhaps yet to conceive attributions of democracy or a full refinement of capitalism is overdue.

As Aristotle has mentioned, “the destruction of the constitution and their preservation lay at the hands of the followers of democracy”.

Reference:

Ibid: Aristot. Pol. 6.1317a