Fixing something that’s not broken

Scott Adams (of Dilbert fame) talked today about why Capitalism needs a makeover. In it he talks about what’s broken (easy lending, profligate spending, unsophisticated investors and sophisticated crime) and what’s still working (freedom of employment and entrepreneurship).

I dont believe this is yet another recession. Its a chance in a lifetime to reshape our approach towards economics. Its clear that capitalism provides some benefit and like all things provides some negative behavior among its participants.

What has to change in my opinion:

1. Spending: Living within your means has to become the norm. If you make $5 you have to spend less than that. I dont believe its required to force saving as much as spending less than you earn. Hence, lending practices have to factor in lot more that just your current earning. It has to discount it by several percentage points, keeping in mind the unpredictability of wage increases (giving room for inflation). I’m not articulating a non-consumer driven society, just a more sane one.

2. Enforcement of current laws: I’m not sure we need more laws. Given SOX already exists for public companies, (and its onerous) what’s needed is active enforcement of it and fixing loopholes in the process.

3. Social acceptance of community good. Its no secret that there are more social entrepreneurs needed now more than ever. This is not so much an economic as a socio-economic requirement.

What do you think? What else’s needed to make Capitalism 2.0 work?

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