Rethinking Business Ethics in an Age of Crisis
Edited by Knut J. Ims and Lars J.T. Pedersen
Chapter 5: The tortoise and the hare: alternative approaches to capitalism
On 15 September 2008, Lehman Brothers filed for bankruptcy. This was the shock event that forced the acceptance that the global financial system was in deep trouble, as investment banks had made staggering losses on risky trading activities. The effects of these losses were quickly and intensely felt throughout society as the banking failures infected the global economic system, especially when governments engaged in gigantic bank bailouts. Recovery remains elusive, as governments and supra-government bodies tinker with proposed regulation, whilst financial institutions seem to want to go back to “business as usual” (Banziger 2012). Trust in financial institutions has plummeted globally (Lex 2012; Tyrie 2012; Edelman 2013). Various deep-rooted factors are blamed, such as the de facto public subsidies given to banks too big to fail by bailouts, high barriers to new entry that stifle competition, lack of price transparency, information asymmetries that have resulted in the sale of inappropriate products to retail and wholesale customers alike, weak corporate governance oversight, and overall short-termism. Crotty (2009) talks about the “perfect calm” in the 2003 to mid-2007 period before the financial crisis came to a head. The perfect calm period seemed to suggest that gravity had been turned on its head, that high-risk–high-return investments were actually safe. In any case, bailouts by central banks over the previous three decades in the face of systemic banking crises only served to reassure bankers that financial gains of the boom would be private while losses were socialised.
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