Saturday, September 27, 2008

CREDIT COLLAPSE: 'A blessing in disguise'

THE near collapse of the financial system in the United States last week, threatening to bring down markets around the world with it, quite naturally stirred up a brouhaha from financial experts armed with perfect hindsight. However, there is one important non-financial lesson Singapore can learn from this 'once-in-a-century' crisis created and driven mainly by human greed.

Wall Street in the past decade has attracted more than its fair share of the best and brightest talent in the US to work in its financial institutions. Most of this top talent joined the party truly believing they were masters of the universe and could turn a supposedly random walk in Wall Street into a surefooted ascent to immense personal wealth. This created a stark reality where regulatory officers, who are paid a miserable fraction of those they are supposed to regulate, are not competent to cope with the complex investment derivatives churned out by these financial geniuses. These policing executives were probably awed and intellectually overwhelmed by the likes of Mr Richard Fuld.

Unfettered capitalism assumes we can allocate economic resources, especially top talent, according to market forces. But it would be very sad if all top talent was skewed away from stable careers that focus on improving productivity and quality of lives. The human world needs the best of its kind to seek cures for diseases, to seek the best inventions to slow global warming and to become inspiring leaders to eradicate war and poverty.

Singapore, especially, has to ensure that some of its best talent is in politics, government, teaching and medicine. Therefore, the Government has every right to be proactive to tweak the manpower and talent management system, and implement relevant policies if there is an anomaly in the distribution of top talent in our economy. Singapore is no US - we can easily end up in the abyss like Lehman Brothers.

So, if the financial debacle did inject a much-needed dose of realism into talented people, we can see it as a blessing in disguise. Hopefully, many of these young people, disillusioned with business models driven by fear and greed, will settle down to more concrete economic activity - to create real value in goods and services for the progress of mankind.

Dr Edmund Lam

[Two lessons: 1- create real value.  Maybe the market does need some way to spread the risk or free up funds, but at some point it becomes too confusing and unaccountable. 2- Someone or some authority needs to regulate. In order to regulate, they need to understand. In order to understand, they need to ask questions and to take time to understand. That means things can't move as fast as those genius would like it to.]

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