Global Capital

In the last few weeks, we have seen globalization working at its best by finding capital investments for companies that specific events or release of results had put at stake their value and in some cases their future viability. Capital flew from thousand of miles away, mainly from Sovereign Funds that many dislike but have no alternative but to accept. Adam Smith would be proud of these situations, seeing that the market itself is able to remedy its own needs. However, by now all his followers seem to know that the market can be too harsh at times and we better regulate it, control it, and, when a market crisis is developing, we have mechanisms to correct it. Even the Bush Administration, that arrived claiming its role as a paradigm for small government, has been a champion of fiscal policy. If only they had had some fiscal discipline or didn’t spend so much abroad (it is a war economy, they say), maybe economy would be better now. In any case they present now a new US$ 150bln program to shake up the economy and avoid recession. Keynes to the rescue.

It is true that some governments only recognize that need when things are already looking bad overall, and don’t pay attention to the needs of many when the economy is performing well on average. But the trend of private wealth (created by capital being smarter than the average in the market) flooding philanthropy seems unstoppable. And not only that: many well-credited voices (they put their money where they mouth is) start calling for a better global system that makes sure poor people is also served. Bill Gates was in Davos this week talking about the need of a ‘Kinder Capitalism’; a creative capitalism that uses market forces to address poor-country needs, which are usually ignored. (http://www.weforum.org/en/knowledge/Events/KN_SESS_SUMM_24144?url=/en/knowledge/Events/KN_SESS_SUMM_24144)

George Soros is also talking about reforming capital markets. True, once he took advantage of its imperfections, but I guess that we should think positive and focus on the future... The need of a global entity that has the power to regulate international flows and require some
standardize policies across the globe seems to be urgent.