Module #6 Capital Markets
Social, Moral, Economics of Foundational Business, MBAC 6002
Discussion Questions & Responses
The Q:
In Andrew Beattie’s article, ‘The Birth of Stock Exchanges’, he points out The New York Stock Exchange has a market capitalization larger than Tokyo, London, and the Nasdaq exchanges combined. The health of the New York Stock Exchange is closely correlated to the fortunes or failures of both the American and the worldwide economy.
The A:
I am immediately reminded of examples of failures in American history. The Great Depression is one example.
The Failure:
‘The stock market crash of 1929 was not the sole cause of the Great Depression, but it did act to accelerate the global economic collapse of which it was also a symptom. By 1933, nearly half of America’s banks had failed, and unemployment was approaching 15 million people or 30 percent of the workforce.’ (History.com (Links to an external site.))
The Fortune:
Alcohol became legal, again! The Great Depression was critical in ending Prohibition. It is believed by politicians that legalizing the consumption of alcohol helped create jobs and stimulate the economy.
Can you think of an example of this correlation in the past 20 years that affect fortunes and failure on a global scale?
The Q:
In his blog post ‘Why Trade the social-function of markets?’ Mark Yu expresses the solution to improving social welfare and correcting the flaws of the current capital markets’ imperfect system is not to throw out the system altogether. He further suggests the government could cap leverage, align incentives, and do a better job measuring and regulating risk to reach a more perfect system.
Do you agree with this?
The A:
Typically, I would agree that pivoting is better than making a drastic change to reach the desired outcome. However, I consider the imperfect system of capital markets to be more of a ‘wicked problem’. The impact of their decisions directly correlates to the health of the world population.
‘Conflict of Interest’ exists between policymakers and power-players similar to that found in law enforcement and systemic racism. We can learn from the ‘Defund the Police’ movement to solve the capital market imperfections. Examine the current practices used to reform the police system that exists in the United States.
For example, the city of Camden in New Jersey fired their entire police staff, redesigned their training program, then had their past force reapply to the system for their past positions. Their approach to police reform has proven to be beneficial with their goal to correct the culture.
Can you think of another?
Watch more on Camden from the Talented John Oliver here: https://www.youtube.com/watch?v=Wf4cea5oObY (Links to an external site.)
