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High-Leverage Finance Capitalism, the Economic Crisis, Structurally Related Ethics Issues, and Potential Reforms

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  • Nielsen, Richard P.

Abstract

In this updated and revised version of his 2008 Society for Business Ethics presidential address, Richard Nielsen documents the characteristics and extent of the 2007–2009 economic crisis and analyzes how the ethics issues of the economic crisis are structurally related to a relatively new form of capitalism, high-leverage finance capitalism. Four types of high-leverage finance capitalism are considered: hedge funds; private equity-leveraged buyouts; high-leverage, subprime mortgage banking; and high-leverage banking. The structurally related problems with the four types of high-leverage finance capitalism converged in something of a perfect economic storm. Explanations for the crisis are offered in the context of the type of the high-leverage finance capitalism system that permitted and facilitated the economic crisis. Ethics issues and potential reforms are considered that may be able to mitigate the destructive effects of what Schumpeter referred to as the “creative destructive” effects of evolutionary forms of capitalism while realizing the Aristotelian economic ideal of creating wealth in such a way as to make us better people and the world a better place.

Suggested Citation

  • Nielsen, Richard P., 2010. "High-Leverage Finance Capitalism, the Economic Crisis, Structurally Related Ethics Issues, and Potential Reforms," Business Ethics Quarterly, Cambridge University Press, vol. 20(2), pages 299-330, April.
    • Handle: RePEc:cup:buetqu:v:20:y:2010:i:02:p:299-330_00
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    Citations

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    Cited by:

    1. Guo Xie & Kai Li, 2023. "Does resident leverage volatility affect corporate profitability?: An empirical study from Chinese A‐share listed companies," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(3), pages 1656-1668, April.
    2. Richard Nielsen, 2013. "Whistle-Blowing Methods for Navigating Within and Helping Reform Regulatory Institutions," Journal of Business Ethics, Springer, vol. 112(3), pages 385-395, February.
    3. Joseph Petrick & Wesley Cragg & Martha Sañudo, 2011. "Business Ethics in North America: Trends and Challenges," Journal of Business Ethics, Springer, vol. 104(1), pages 51-62, April.
    4. Richard P. Nielsen, 2016. "Action Research As an Ethics Praxis Method," Journal of Business Ethics, Springer, vol. 135(3), pages 419-428, May.
    5. Richard Nielsen & Felipe Massa, 2013. "Reintegrating Ethics and Institutional Theories," Journal of Business Ethics, Springer, vol. 115(1), pages 135-147, June.
    6. Richard P. Nielsen, 2018. "“Ethical and Legal First Amendment Implications of FBI v. Apple: A Commentary on Etzioni’s ‘Apple: Good Business, Poor Citizen?’”," Journal of Business Ethics, Springer, vol. 151(1), pages 17-28, August.
    7. Antonio Thomas & Bruna Marinangeli, 2016. "Social reporting and voluntary disclosure in Italian Credit Cooperative Banks," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 13(2), pages 178-194, May.

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