“Greed is good. Greed is right. Greed Works. Greed clarifies, cuts through and captures the essence of evolutionary spirit. Greed in all of its forms- Greed for life, for money, for love, for knowledge, has marked the upward surge of mankind.”- Say’s Mr. Gordon Gekko, the famous character in the movie ‘Wall Street’. But is it always right? He might have overlooked the intension behind the greediness in the capitalist world. Greed is catastrophic when it is not backed up by good intensions, right kind of vision and healthy and constructive strategy for the stake holder’s benefit. Isn’t it? This is why we are seeing the so called first world countries are going flip flop with the consequences of evil capitalism.
In the late 2009, just when the world was recovering from the great financial crisis started from the USA, the fear of sovereign debt crisis in Greece, Portugal and Ireland again created panic among the investors. This has jeopardised the whole world economic system. Now revelation of Italy and Spain into the list has certainly raised question on Euro Zone’s future existence.
The obvious question emerges here is, how these troubled countries which have 7% of world’s GDP can pose a serious threat to the world economy. The answer is, we are not talking about those five countries but we are talking about the entire 27 countries in the European Union which have a 25% share in world’s GDP and that’s a real scary number!
The problem in Europe is that they are completely dependent on credit. The governments are in deep debt, most corporations are in deep debt, most consumers in this part of the world carry huge debt. It means that without a free flowing credit system nothing is going to work. But unfortunately the banks, which are the centre of this credit system, own a large amount of debt of these Governments in their balance sheets. And now the situation is like, these governments cannot pay to these banks if the Euro Zone falls. If that happens then the banks can not lend further because they are not getting their money back which they have invested in Sovereign Debt so the ability to the credit to be extended stops. Then the whole mechanism of the financial systems grinds to a halt and the economic engine stops.
Than what are the solutions available in front of Euro Zone leaders? Well, In this kind of situation, the Government, the central banks and multilateral financial institutions line IMF should come into the picture and try to bail out the top banks, corporations, stock markets in the hope that the benefits would be trickle down to the bottom average people and average small business and so will get out of the economic mess. In most of the times the trickle down never happens. The top takes the benefit and bail out to weather the economic storm, leaving the rest of the society wondering when the trickle is supposed to happen. In the past the European did that and the American did that. It didn’t work because the bottom is too big and the failure of the benefit to trickle down means that average people and small and medium scale industries cannot buy material, cannot borrow money and cannot lend any money. Then this failure of the bottom, which is so large, would eventually drag down the top as well. And this is perhaps the reason why Germany, France and UK are quite reluctant to bail out these countries and which is why a political consensus on this issue has not been achieved.
The other solution could be disintegrate these five troubled economies from European Union and let them go back to their old currency system. But this would have its own catastrophic consequence like failure of the European Union treaties in the political front and severe economic contraction in the region due to the devaluation of currencies and the credit degradations.
So the greed is finally going to engulf the entire region with its own evil wings. And the solutions are; either the countries would join hands to come out of this mess or make some countries the fall guy and bring in some temporary solutions. If the former happens then we will see a socialistic approach to solve a problem of intense capitalism and if later happens then we will be seeing a start of state owned ‘crony capitalism’ in Europe.