Economic Philosophy to Preserve Democratic Capitalism

School of Optimal Governance

October 2, 2010

Pro-Prosperity.Com and Citizens for Development

Dr. Sankarshan Acharya
Associate Professor of Finance, University of Illinois at Chicago
Director, Finance and Governance Research Center, India
October 2, 2010

People prefer democracy to authoritarian governments.  But they panic when they lose their jobs and hard-earned wealth in a powerful democratic nation like the USA.  They question whether democratic capitalism is less competitive than the state-sponsored nondemocratic capitalism of China. 

They see that corporate behemoths like General Motors, Goldman Sachs, Merrill Lynch, Lehman Brothers, Bear Stearns and Citigroup have been run by the top graduates from esteemed business schools.  But when these behemoths tottered, all at once in 2008, people worried about the efficacy of the top business school education for preservation of jobs and wealth in a democracy. 

Prominent government regulatory agencies, led by graduates from top business and economics programs, too failed to see the financial crisis of 2008.  This worried people about whether the policy advice to their government, stemming from the top business and economics graduates, could preserve employment and wealth in a democracy.   

Top academic publications in business and economics as well as the resulting punditry appearing in mainstream media were eerily devoid of any premonitory discourse of the looming financial crisis or of serious deficiency in governance of private and public enterprises.  The pundits rather proclaimed, after trillions of dollars in wealth were wiped out and millions of jobs were lost, that no one saw the catastrophe coming.     

This begs the question of whether the process of selecting pundits has failed or that the crisis was really an act of invisible hands (almighty) as claimed by some pundits? 

As a selfless researcher, I have relentlessly pursued with the U.S. Congress since 2003 to undertake policies to avert the crisis preemptively.  These policies have emerged from my academic research in 1994 on efficient resolution of moral hazard in banking and financial markets. The Congress heeded to my warnings in 2003, perhaps because it had already enacted an unprecedented bank foreclosure rule in the FDICIA 1991 based on my earlier research.  The Congress had asked the Federal Reserve, after receiving my warnings in 2003, to testify if banks were safe and sound and then to convene a conference of economics and financial market experts.  The experts concluded that the U.S. banks were safe and sound.  Even a Nobel Prize winner, who also was the President of the American Economic Association in 2003, asserted how the U.S. banks and financial markets had become invincible.  They are all highly respected experts from name-brand universities with publications in prestigious journals.  Yet, they collectively failed to see how, under the veneer of their hubris and the façade of economic growth, a deep depression was lurking.  Now the same custodians want the rest of us to accept their theory of invisible hands causing the massive failure of the system of governance of banks and financial markets they sired and operated.

This selfless researcher too studied with the experts, was trained by some of them and published in the prestigious journals edited by them.  Yet, my research could uncover the profound truth that the banks and markets would collapse unless proposed preemptive policies were enacted.  The celebrated journal editors, referees and experts rejected this research.  This research depicts vividly how the human designed system [not invisible hands] had been deepening the depressing economic malaise underneath the aura of American prosperity.

The prevailing wisdom, embraced and maintained by the experts is that (a) the current form of the market is like the almighty and all theoretical and empirical research must fit into this characterization, and (b) any researcher who successfully proves that this dogma is fallacious would be penalized, ostracized and pilloried by the profession. 

I did not kowtow to the tacit dictates of the profession and chose to sacrifice immensely (in terms of forfeited “rise” within the profession) in order to uncover and spread the truth with a sole mission to serve society, though academic publications, internet site and communication with the representatives of people.  Service with integrity, I believe, should remain the fountainhead of an academy, which is supported by society.

My research begins with a predicament:  If the current form of the market has been designed and operated by human beings, it cannot be almighty, because almighty is commonly presumed to be beyond the reach of humans. This predicament necessitates that we define almighty, rationally, like a scientist or a mathematician or an economist would do and still make the definition universally acceptable by theists and atheists.  Finding the truth about universal beliefs and universally acceptable almighty is the only path available to the mankind to live harmoniously. 

Everyone who has read my script of Universal Religion (Beliefs) and Almighty (God) has accepted it.   This is perhaps why Google search for information on universal god produces this script at the top of more than 8 million sites.   

So, at least for the sake of the economy and widely cherished democratic capitalism, the current form of the market is not the almighty.  The question then is how we should design the markets such that trading-exchange of goods and services, longed commonly by all-can be pursued freely, and then how should the government of We the People maintain such freedom efficiently.  This behooves upon us to establish the School (philosophy) of Optimal Governance based on the constitutional system of money, finance and governance, uncovered through my selfless research.   I have shown (see that the SOG founded on an economic philosophy-stemming from decades of selfless research-is necessary to fulfill the common longing of people for (a) constitutional democracy, (b) preservation of hard-earned capitals which is the essence of capitalism and (c) enhanced national competitiveness which is necessary for employment. 

See Acharya, S. (2008), “A Unifying Philosophy of Governance,”

See Acharya, S. (2010), “Constitutional System of Money and Finance,”