Age of Casino Capitalism– Unabated Speculation–Unregulated Excesses– Insidious Practices: Temple of Greed or Darwinism…

In common parlance, the term casino capitalism refers to the unregulated excesses associated with the ‘boom and bust’ cycles of large speculative ventures… the kind of high-risk/high-reward behavior indulged in by former banks, financial institutions… which helped lead to the economic crisis…

Its origins in the literature probably lie with John Maynard Keynes and his famous General Theory of Employment, Interest, and Money, first published in 1936 were he refers to the ‘casino capitalism’ embodied in the winning and losing of fortunes on the stock market.

In his book Keynes writes; when the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. The measure of success attained by Wall Street, regarded as an institution of which the proper social purpose is to direct new investment into the most profitable channels in terms of future yield, cannot be claimed as one of the outstanding triumphs of laissez-faire capitalism…

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In the book Casino Capitalism by Susan Strange writes: The Western financial system is rapidly coming to resemble a vast gambling casino… considerable increases in risk and uncertainty in economic markets gave rise to substantial social and political disruptions in the global system.

She links these changes to five major trends: (1) innovations in the way financial markets operate; (2) increased scope of markets; (3) shift from commercial to investment banking; (4) rise of Asian investment markets; (5) government regulation in banking…

Ms. Strange argues for increased regulation and more substantial American leadership, which she believes is required because of the predominant role of the United States in the world markets..

The term casino capitalism also appears in the work of Irving Fisher and Hyman Minsky. Fisher, along with others in the 1930s, was faced with the problem of explaining the tragedy of the Great Depression. The common view among economists of this era was that financial markets were like casinos, rather than ‘markets’ in the usual sense of the word, and that these speculations contributed mightily to the social ills of the day. Fisher, along with John Burr Williams and Benjamin Graham, claimed that the casino metaphor was misplaced.Instead, they argued that asset prices of financial assets reflected ‘intrinsic value’, which in turn could be calculated by deciding the total value of dividends likely to be produced in the future…

In all these cases, the notion that capitalism is essentially speculative and little more than a system of big and small bets in a grand game of chance is at work, and most of the writings around this topic focus on ways to make this irrational system more susceptible to reason and stability…

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In the article Casino Capitalism by Mark G. McLaughlin writes: Wall Street is a ‘casino’ where the dice are loaded in favor of financial institutions and the ultra-rich; according to economist Susmit Kumar in his book Casino Capitalism. Hedge fund managers have ‘squeezed the juice’ out of the U. S. economy, charges Kumar. He argues that, through a variety of insidious practices, they have twisted capitalism into something so ‘evil’ that ‘not only does it destroy its own people, it also creates its own Frankenstein, China…

According to Kumar; in its present form ‘capitalism is not feasible’, although democracy is the best of all ‘-cracies’ but it too has deficiencies that needs major reforms… What hope there is for the future lies in the democratic process… But, democracy requires educated, informed, sensible voters; spread of education is thus of the highest priority…

In the article Casino Capitalism by Robert Reich writes: The so-called attack on ‘private equity’ is neither a personal attack on individuals nor a generalized attack on U.S. business… It’s an attack on a particular kind of capitalism that both practice: Using other people’s money to make big bets which, if they go wrong, can wreak havoc on the economy… It’s the substitution of ‘casino’ capitalism for ‘real’ capitalism, the dominance of the betting parlor over the real business, and financial innovation rather than product innovation…

In the article Casino Capitalism by Patrick J. Buchanan: With the ‘robber barons’ of the early 1900s one could see a connection between the wealth, for example of; Rockefeller, Harriman, Carnegie, Henry Ford… and their contributions in building America. Railroads were tying America together. Oil was fueling industry. America was surpassing Britain in steel production. Ford was putting the nation on wheels. When J.P. Morgan took to the floor of the New York Stock Exchange in 1907 to issue a buy-order; he stopped a panic…

There was perceived to be connections between wealth of these men and achievements. They were helping make America the most awesome industrial nation known to man. But as scholar William Quirk writes in his essay ‘Saving the Big Casino’; financial institutions now seem to rise and fall on profits and losses from the trading of; ‘derivatives’, ‘credit default swaps’, ‘exotic securities’… that not one man in a thousand understands…Fortunes are lost and made overnight. Names appear on the list of richest people who no one has ever heard of. Cheating and corner-cutting are constantly being unearthed.

Broker-and banker-gamblers in their 30s amass and flaunt nine-figure fortunes… Were the rest of Americans doing well, this might not matter but America is not doing well. And Americans are coming to believe that a system where high-rollers rake in tens of millions playing ‘Monopoly’ while workers who build things and make things never see a pay raise is rigged and wrong… Few begrudge a Bill Gates his fortune. But where vast wealth accrues to people whose actions seem unrelated to any contribution to society or country, and to have come simply from rigging the system for their own benefit, that system will not endure. The casino capitalists are playing with fire…

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In the article Casino Capitalism Explored by Michael Sandel writes: Risk is part of life, but financial speculation plays a growing role in the economy. When farmers plant crops or when companies build factories, they place a kind of bet. But these bets are incidental to productive activity. What about traders who don’t grow crops, but simply bet on the future price of wheat? Or hedge funds that don’t own Greek bonds, but bet on the likelihood that Greece will go bankrupt? Or brokers who buy insurance policies on lives of strangers and collect when they die?

These practices raise questions that intersect ethics and economics: Is there a moral difference between investing and gambling? If so, of what does it consist? The financial crisis of 2008 posed these questions with great urgency, but public debate has yet to grapple with them. Has capitalism lost its way, and how might it find its moral bearings…

In the article Rise of Casino Capitalism by Chris Hedges writes: The cultural embrace of illusion and the celebrity culture that has risen up around it have accompanied the awful hollowing out of countries. We have shifted from a culture of production to a culture of consumption. We have been sold a system of casino capitalism, with its complicated and unregulated deals of turning debt into magical assets, to create fictional wealth for us and vast wealth for the elite.

We have internalized the awful ethic of corporatism– one built around the cult of the self and consumption as an inner compulsion– to believe that living is about our own advancement and our own happiness at the expense of others… The free market became the god and government was taken hostage by corporations, the same corporations that entice us daily with illusions though mass media, entertainment industry and popular culture… According to Willy De Backer; we live in an age of proliferating political zombies, dis-imagination machines and punishing factories. This is an age of full-blown authoritarianism parading, ironically, in the name of freedom and liberty….

So how justified is disillusionment with capitalism? According to Lawrence Summers; this depends on the answer to two critical questions. Do today’s problems inhere in today’s form of capitalism or are they subject to more direct solution? Are there imaginable better alternatives? This problem is genuine. But does this reflect an inherent flaw in capitalism or, as Keynes suggested, a ‘magneto’ problem that can be addressed with proper fiscal-monetary policies, and which will not benefit from large-scale structural measures? So at one level the answer here is simply to insist on more political will and courage. But at deeper level, citizens of the world who believe that they live in progressive societies are right to wonder why increasingly affluent societies need to roll back levels of social protection.

Paradoxically, the answer lies in the very success of capitalism… When outcomes are unsatisfactory, as they surely are at present, there is always a debate between those who believe that the current course needs to be pursued with increased vigor and those who argue for a radical change in direction. That debate is somewhat beside the point in the case of capitalism: Where it has been applied its been an enormous success…

According to Dorian Scott Cole; many countries and people point to capitalism as if it was an independent entity that we serve and which dominates the world. If we allow it to be, then it is. In reality, what capitalism is, is up to us. It is up to us to make capitalism serve us. But first we have to understand what we are pursuing. Each will have its own reward. Simple gluttonous greed will end in the destruction of us all because we are simply competing against ourselves. But a system that is controlled to benefit us all, will benefit us all…