No doubt those who work in the markets would say they're making rational decisions based on the facts, but it brings to mind the fable of the frog and the scorpion. The scorpion asks the frog to carry him across the river. The frog's worried that he'll be stung, but the scorpion points out that, if he does that, they'll both drown. But when they're halfway across, the scorpion unleashes his fatal sting. "Why?" asks the frog as they start to sink. "It's in my nature," replies the scorpion.
In recent years the market has veered between what former US Federal Reserve chairman Alan Greenspan called "irrational exuberance", which sets us up for a fall, and panic, which makes the fall worse than it needs to be.
Like democracy, capitalism is far from perfect, but history suggests that both are miles better than the next best systems. The standard criticism of capitalism is that it creates inequalities, but given that human beings aren't equal, inequality would seem to be a fact of life. Most people can sing better than I can. Some men are granted a full head of hair for life. Many Kiwi males dream of becoming All Blacks, but the dream comes true for only a few. The rest simply aren't good enough.
Governments have tried various ways, benign and otherwise, of alleviating the harsh reality that some people have a knack for making money and some have talents which society values, and therefore rewards, more highly than others. Communist regimes eliminated private property; in Britain in the early 1970s a combination of very high income tax rates and a surcharge on dividends and investments meant the highest earners were paying tax at 98 per cent.
In the end most countries have reached the conclusion that it flies in the face of economics, common sense and human nature to act as if you can have a prosperous society and maintain expensive state services while inhibiting or preventing the acquisition of personal wealth.
Thus capitalism is the last man standing, which has a downside. During the past couple of decades we've seen rather too much of what former British Tory Prime Minister Edward Heath called the "unacceptable face of capitalism".
For instance this week we were reminded that individuals and firms can make staggering profits at the community's expense via what asset strippers and corporate predators euphemistically call "restructuring" or "rationalisation". Our unlikely source was Newt Gingrich, the new frontrunner for the Republican Party's presidential nomination. According to Gingrich, his main rival, the fabulously rich Mitt Romney, a former head of a venture capital firm, earned his fortune "by bankrupting companies and laying off employees".
While some audiences would lap this stuff up, the Republican Party isn't among them. Its current economic policy, such as it is, boils down to the rich getting richer and the poor getting stuffed. In Republican terms Gingrich was accusing Romney of being good at capitalism.
As conservative sage Charles Krauthammer complained, "This kind of attack is what you'd expect from a socialist".
Despite its excesses, capitalism shouldn't cop all the blame for the fine mess we've found ourselves in.
The seeds of the current crisis were planted when society decided that thrift was an over-rated virtue and an out-dated notion. Once debt lost its stigma, we embarked on a decades-long consumerist spree. Capitalism may have planted the seductive notion that we could have what we couldn't afford and, what's more, we could have it now, but it wasn't a hard sell.
The bankrupt Terry Serepisos, once a focus for entrepreneur worship, turns out to be the poster boy for instant, highly leveraged gratification: according to the official assignee, he owed more money on his four luxury cars than they're actually worth.
And like indulgent parents pandering to spoilt children, governments have preferred to borrow rather than tell the electorate that their panoply of entitlements has become unaffordable. No wonder the Greeks are rioting: like everyone else they'd been led to believe that they could live beyond their means indefinitely.
