State regulation or state capitalismc: a systems approach to crisis prevention and management
The recent economic and financial crisis of 2007−2009 and the ongoing recession in Europe have shown the inadequacy of classic concept of capitalism. The rationality of economic agents and self-regulation of markets have been questioned. Views on the future of capitalism range from its fine-tuning to the complete overhaul. This paper argues that economic regulation might be a better option if a systems approach is used as its underlying methodology. To illustrate the point, we analyse the financial sector from the viewpoint of a network organisation. Without a systems administrator, the network effects, including the systemic risk, cannot be internalised by the markets themselves. Markets are living systems, similar to complex biological systems. Just as full spontaneity is absent in the world of living beings, so it is absent in the world of the economy. The sustained regulation of collective behaviour of economic agents is needed for capitalism to survive.