During the past few weeks, the world has rendered a verdict on U.S.-style capitalism and the results are not pretty. Markets are plunging, the dollar is shedding value against major currencies and executives have been thrown to the lions. There is a crisis of confidence in U.S. business, and rightfully so. The productivity miracle of the 1990s -- the longest economic expansion of the postwar era -- now looks like a magician's trick. And indeed, the revelations of the past few months show that many impressive gains were nothing more than accounting sleight of hand. Only firm action that restores integrity and credibility to businesses, and the markets that discipline them, will end the blood-letting.
The business scandals that have been revealed in recent weeks are both impressive and disturbing. The scale of the failures has been spectacular. Enron was once one of the largest corporations in the United States. WorldCom is one of the world's largest telecommunications companies. Billions of dollars have disappeared; hundreds of millions have been siphoned off by executives. The spillover has hit solid, reputable companies: Any rumor or recalculation of profit sends a tremor through the markets.
According to one survey firm, over the past two weeks $17 billion has fled U.S. stock funds. Since its peak in 2000, the Nasdaq exchange has lost three-fourths of its value, the worst decline for a major stock average since the Depression. The Standard and Poor's 500, a benchmark for the overall market, has fallen 40 percent over the same time. The dollar has breached parity with the euro and fallen against the yen to its lowest point since February 2001 and is now trading in the 115 yen range.