In Tomorrows Company’s  recent timely report Tomorrows Owners the authors described the global economic system as consisting of three sub-systems – the real economy, engaged in the production of goods and services, the financial economy, providing capital to the real economy and the ‘casino economy’ of speculative activity. In the weeks since the launch of the report, as the current financial crisis has developed, many commentators around the world have attributed blame for the crisis to Anglo-American casino capitalism.

 

 The  idea of a  ‘casino economy’ is not new and it has strong academic foundations, possibly the first person to liken speculative activity to a casino was John Maynard Keynes in his seminal work The General Theory of Employment, Interest and Money.

Regulation of the capital markets around the world changed radically following the stock market crash in 1929. The unprecedented fall in share prices largely reflected the massive loss of confidence in the quality of information made available by companies and the brokerage houses that sold their stock. Governments responded by enlisting the accounting profession to help restore that lost confidence. Publicly-traded companies were required to report regularly on their financial condition in conformance with what have come to be known as “generally accepted accounting principles” GAAP). Governments required publicly-traded companies to engage audit professionals to attest to the fact that the information presented by company management actually did conform to those principles.

However, the world has changed dramatically in many different ways since the 1930s. Among other things, increasing globalisation has meant that the economies of different countries are much more closely linked — by trade and capital flows — than ever before. Technological change, especially in vastly improved communications, has led to information becoming both widely and instantaneously available.