Ethics: The cult of materialism

The western world has been in the midst of a economic boom since the early 1990s. We have experienced a speculator rise in asset prices (shares, property, art, etc), making people richer beyond their dreams. The question is - Is this a good thing? History tells us of the boom-bust cycle, and there are people arguing that this boom is no exception. There are also people telling us that things are different this time.
The positive factors are:

1. Opening up of the Russian, Indian and Chinese markets
2. Solid growth in productivity
3. Deregulation of international trade with the reduction in tariffs
4. Deregulation of financial markets, resulting in more competitive costs of capital

The negative factors are:

1. Interest rates and inflation are at record lows
2. Debt levels in western countries are at record levels
3. Wage restraint is showing signs of weakening at a time when productivity is also declining

The culmination of these factors will be a decline in demand and higher costs of capital. Markets move in short & long term cycles. The year 2005 is likely to a temporary pause in growth, so the boom can continue years on. At some point however, the global economy will come to a sudden halt. These slumps have typically been associated with plummeting asset prices, resulting in foreclosure and bankruptcies.

In the wake of this crisis in confidence, there will be calls for greater regulation, market greed will be blamed, as well as free markets that permit this unrestrained prosperity. This has been the 'conventional wisdom' of financial collapses in the past, and its simply wrong. On this point, several points can be made:

1. Capitalism is only as efficient or effective as the market structure and participants allow it to be. If market structures are poorly conceived, then we see a distortion in market outcomes. This creates a disparity in market power, positions protected by vested interests, often alligned with the government of the day. Outcomes that place the rights of some at the expense of others is fascism (not capitalism), and importantly the rationalisation is that these interests serve the interests of society.
2. Capitalism is a market structure, yet it does subsume a code of values. A system which allows participants to negotiate value for value in free & unfetted trade is based on an ethic of self-interest. Free trade can only occur as long as the rights of participants are protected. It is the role of governments to protect ALL participants interests, not just to serve the interests of those parties that allign themselves with the government. 'Greed' is attributed to market participants, but where is the evidence to suggest the package of values related to 'greed' is caused by capitalism, since its clear that people participating in markets have very different values.
3. Values are sought by market participants. What a person seeks is a reflection of their philosophy. The market structure does not account for personal tastes. The market certainly facilitiates the pursuit of self-interest, but that leaves open their 'theory of values', what they actually desire or want to achieve. Do they take pride in producing an exciting new product, sleeping with every girl they meet, or giving the proceeds of any success they have to community charities, or some combination of the above. Any number of characterisations are possible, and a great variety exist in any market.

The question is thus - How do we go from a prosperous society to a demoralised, destitute market. The answer is philosophical.

1. Hierarchy of values: Everyone has a hierarchy of values. We start off valuing the basic necessities of life. The food, water & shelter that gives us security. Subsistence living gives us that. It defines our relationship to the world. They are values we ignore at our own peril, so we don't. The next level of values are