Source: PBS's NOW

The genius of all great systems is their ability to reinvent themselves, to adapt and adjust to changing environments. This ability not just to evolve is one of the central characteristics of capitalism. Even in its darkest moments—perhaps especially in its darkest moments—it tears down that which does not work and creates incentives for people and companies to find new solutions, ideas, alliances, technologies that will work better. That's the reason why those whose response to the current crisis is to announce the end of capitalism are so misguided. Capitalism will survive. But it will not, and should not, survive unchanged.

We went too far toward what the French called "hyper-capitalism" of creating markets that lack the kind of regulatory mechanisms and social shock-absorbers that virtually all markets have had since the dawn of time. The idea of the completely free market is an abstraction and a practical impossibility. Since the earliest days of capitalism the rights of market actors have been constrained to protect the public good whether it was by laws enjoining dangerous behaviors or by requiring the a portion of profits go to the state to provide essential services. In our recent past we not only ideologically tried to push back too far against those mechanisms that protect the public interest with regard to markets but a number of revolutions made those mechanisms that did exist far less effective.

Globalization put many corporate activities beyond the reach of national governments. New financial instruments grew so complicated even sophisticated regulators couldn't understand them. New technologies added speed and volatility to degrees that made it impossible for regulators to keep up. And that's only the story in financial markets. In other global markets the challenges have been similarly great.

Now, in order to compensate for these failures, we are going to enter an era in which regulation is resurgent both at the national level and at the global level. New institutions will have to be created to ensure that global markets serve the greater good and disruptions within those markets do not produce unacceptable collateral damage to society. This is hardly the end of capitalism. Rather it is simply the beginning of 21st Century global capitalism. It may be different from that to which we have been accustomed for some time, but it will also be perhaps the single most important force defining the global era because it will link nations and define necessary changes with a speed and force beyond the capabilities of any other global system (including government). That can be a good thing, often will be, but we need to remember that capitalism is an amoral system and that a society without a moral basis is unsustainable. That must come, at least in part, from government. In the century ahead, it must come in part from international as well as traditional national mechanisms. Finding the balance between these new and historic forces will be one of the great challenges of the decades ahead.