This must be some kind end of an era.
Lehman Brothers, Bear Stearns; names which are familiar in the realm of economics are no more. New prints of textbooks are required because the old ones are already outdated.
I spent almost continuously for four years living in the Michigan Union and every year, I would pass through its proud hallway. In front of doors along the hallway so full of memories, premium names would appear. Each year without fail, these institutions would visit Michigan for recruitment purpose.
It was here how I learned of these names. And what I did not know, I later learned more comprehensively in classes and later, through wider readings, sometimes in the libraries and usually on the internet.
During senior year, the highfliers were talking of joining these names, of joining the Lehman Brothers. I could only look at them enviously.
This is definitely not the first time names such as the Lehman Brothers have been swept away by time and carved only in history now. Drexel Burnham Lambert is another prestigious name which suffered the same fate approximately 20 years ago. Michael Lewis in Liar’s Poker skillfully described that era when he was with the Salomon Brothers.
In this time of collapse, doomsayers are sprouting like mushrooms after the rain. The end of capitalism, they say. Look around, the sky is falling.
On the contrary, no. The sun will rise again tomorrow and so shall we.
There is pain involved but all this is part of capitalism. It is to some extent a free market. Though the Austrian-inclined would deride what mainstream economists would call business cycle, the periods of exuberance and pain are just part of the game. We reap what we sow.
Similar crisis happened in the past in the 1980s in form of savings and loan crisis. In the aftermath of the crisis, market reforms were carried out, resulting in stronger market and renewed confidence in capitalism. The same will follow the subprime mortgage crisis after the dust settled.
Business failure is typical in capitalism. There is risk in business, as in life, and failure humbles us all. It reminds us that we cannot win forever and ever. Any state effort to artificially eliminate risk will only make us arrogant. Mark my words, the bailouts of Bear Stearns, Fannie Mae and Freddie Mac will be the seeds of future disaster.
There is really no need to overly worry and panic each time businesses fail in a free market because each time it happens is one more time for all of us to learn something new, or to relearn something which we forgot.
It is still sad to watch everything that is familiar going down in flames. Watching people, especially honest hardworking smart people, losing their jobs is always heartbreaking for me but losses and failures are bitter medicine. It is sad but let it fails. The invisible hand is at work and it knows better. After all this, we will emerge stronger.
So, here is to capitalism for there is none else better. We have reached the end of history.
