You'd hardly expect bankers to herald the failure of two of the world's most venerable institutions as milestones. Yet that was the spin when Barings PLC blew up in 1995 and Yamaichi Securities did the same in 1997.
Letting Barings, a 233-year-old bank that financed the Napoleonic Wars and housed accounts for British royalty, and Yamaichi, a 100-year-old bond house and one of Japan's Big Four brokerages, go bust was thought to prove the wisdom of capitalism.
The weak died; the system worked. Congratulations were in order.
Recently, two more marquee-caliber institutions blew up -- one American, one Japanese. Washington called Enron Corp's collapse a milestone; Tokyo felt the same way about its handling of Daiei Inc's meltdown. Which was a real victory for global capitalism? Enron, albeit marginally.
It won't be pretty or pain-free, but the US allowed Enron to fail. Company executives in Houston called everyone in their Rolodexes for help, including senior US Treasury and White House officials. Enron felt the wads of cash it had tossed at politicians, including President George W. Bush, entitled it to a Long-Term Capital Management-like bailout. Washington said no.
"Companies come and go," said Treasury Secretary Paul O'Neill. "Part of the genius of capitalism is people get to make good decisions or bad decisions, and they get to pay the consequence or to enjoy the fruits of their decisions. That's the way the system works."
Japan's system is doing exactly the opposite. Take last week's announcement of a probable 420 billion-yen (US$3.16 billion) bank bailout of Daiei Inc, a household-name supermarket chain.
Daiei is one of Japan's doomed companies. It's barely hanging on now and probably won't last another two years. The challenge for the world's second-biggest economy is dumping the failed "Japan Inc" strategies of the past. That means not protecting businesses that should fail. Or letting banks -- and aiding them -- keep bad loans on their books indefinitely.
In short, it means becoming more of a capitalist economy, and less of a socialist one.
That's not to say that the US system is perfect -- far from it. Any economy that breeds a disaster like Enron, allows it to prosper and heaps praise at executives who fooled the world for years has major problems.
In recent decades, the US has preached the gospel of free markets here in Asia. Since the 1997 financial crisis, Washington has lectured Asia for its crony capitalism, dodgy corporate governance and poor transparency. Yet where was that the corporate governance where Enron was concerned? Or the transparency? Corporate America is looking just a bit hypocritical at the moment.
Chat with a businessperson here in Asia these days, and you'll hear a similar observation: Even after Enron, Wall Street is still buying into the sales pitches of the likes of Amazon.com Inc and Cisco Systems Inc and their creative accounting schemes.
The US, many here say, should look at its own problems and stop lecturing others.
Nevertheless, what we've seen in the US in recent weeks are market forces exacting their judgment. While it's little comfort to employees screwed out of their 401(k) money, it was the market that decided the winners and losers where Enron was concerned. In Japan, the government is still doing it.
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