Reforming the United States’ Economic Model after the Failure of Unfettered Financial Capitalism

Source: Richard Freeman, Chicago-Kent Law Review, Vol. 85 no. 2, 2010

From the abstract:
This Article is based on the 2009 Kenneth M. Piper Lecture at the Chicago-Kent College of Law. The 2008-2009 financial meltdown and ensuing economic developments have shown three things about modern capitalism: First, that unfettered financial markets remain the Achilles heel of capitalism with the capability of destroying economic stability and bringing misery to all. Second, that high-powered incentives paid to “talent” in finance are a fundamental cause of the excessive risk-taking, chicanery, and financial fraud that contributes to instability. Without a new compensation system that rewards banking and finance for contributing to sustainable economic progress rather than for economic rent-seeking and a renewed regulatory system that punishes chicanery and financial crime and near-crime, there is unlikely to be any change in the behavior of the financial world. And finally, that in the wake of the implosion of laissez faire finance, labor and allied groups have to participate in rewriting the rules and regulations governing banking and finance so that finance serves the real economy rather than the reverse. Accordingly, if Wall Street insiders continue to make the key policy decisions alone, banking and finance will remain a loose cannon on the good ship Capitalism, sure to crash the ship yet again.

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