Here in this case the fall of Andersen was linked with the fall of Enron. Andersen being the Accounting firm for Enron and having gone the wrong way to help its client out of its financial mess. Lets evaluate this from a more Macro perspective of what this might potentially mean for the capital market, the economy and the very society based on capitalism.

Capitalism, as we know has provided with the much-required economic freedom which has served as a very strong base for prosperity from its very beginning around the 16th century time frame. From this time on, to date there has been a lot of debate on how this capitalistic market should function. There was a section of conservative economic thinkers who would vouch for Adam Smith, who believed in the intrinsic strength of the market and that it could take care of its own and thus should be left alone to respond to the various market fluctuations. Here the sellers and buyers in the market place would provide direction for the market and that any sways on pressure would be countered by the markets own intrinsic resistive mechanism. Then there was the socialist group of thinkers influenced by Carl Marx, who would see Capitalism as the roots of social tension as it is based on greed and wanting to make more money irrespective of what it costs beyond their purview. Finally we would come to the liberal economic thinkers, led by John Maynard Keynes trying to bring in a regulatory body in this market arrangement which would act as a facilitator and help counter the market force if it spins beyond proportion. This regulatory body is what we now know as the Federal Government in some countries and Central Government in others.

Now with this background lets come back to our original problem of the near demise of the two big private firms, which were a darling of the capital market, not so long ago. Instead of looking at what caused this, lets look at why it should have happened in the first place and could it have been stopped before happening. Now as we know that the regulatory body, Federal Govt. has lot of economic and political power, which it can and does exercise. The role and extend for such a regulatory body has always aroused a lot of nerves among the conservative and liberal economists. While the conservatives vouch for a diminished regulatory body and the liberals for a more powerful role for such a body. Now with the current levels of power the Federal Govt. enjoys any conservative would argue of what is the regulatory body doing when even with its large presence this could not be prevented, so of not much use. While the liberals would argue the success rate this body has brought into capitalistic setup (acting as a regulator or facilitator) giving rise to the GE's, IBM's, Walmart's, Exxon's, Microsoft's and the like and that if bestowed upon with greater regulatory power could have even prevented such demise. While the above arguments would have been generally expected, but most economists would suggest, irrespective of being a conservative or liberal that the Federal Govt. has enough power to check for such malice in the capital market. But its inability arises out of its bureaucracy (with large procedural impediments) and political ambitions (usually based on partisan interest). This clouds the very purpose of why it is in place, which is to act as a responsible market regulator (or should we say a responsible facilitator) which makes economic sense and also for the general well-being of the entire society by taking care of warfare and welfare which makes social sense.

So will such demise be a regular fixture in this economic set-up which could probably shake-up or jolt Capitalism as predicted by Carl Marx, or would the Government step-in with its bestowed power and act appropriately and control the market fluctuations and avoid such further demise, the though first architecturally structured by Keynes is a question posing the economic community and the answer … only time can tell.

More articles by Ramachandran Iyer

1. "Andersen & Enron: Products of Capitalism"
2. "Predicament of the Telecom World"
3. Human Race over the Centuries
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5. "US Economy and impact on IT Jobs"
6. Business Process Outsourcing (BPO)
7. "Asian Heavyweight Economies: China & India"
8. "India Speeding in on IT enabled services"
9. SIP "The Re-Defining Factor"
10. Evolved Human Genre- driving Wireless Growth