The Financial Tower of Babel, Economic Strategies

In the Bible, people began to create a Tower that was to be a materialistic

ladder to Heaven. The Tower crumbled when the communication mechanisms

of finance were lost. In the last twenty years the global economy has undergone

enormous economic growth. Europe and North America, created a consumer

based, materialist Tower Babel made of debt and excessive leverage. This Tower

collapsed as confidence in the language of the financial world (debt, securitization,

leverage and antidotes trust, liquidity and interbank lending) collapsed.

Although the latest crisis appears to originate in the financial sector, the

origins are much deeper. Capitalism and the relentless search for competitive

advantage, has resulted in huge volumes and variety of goods and services.

Demand has to keep pace with supply, which marketers seem to understand, but

economists have ignored. Over the last twenty years, the manic search by firms for

competitive advantage has been most marked in the speculative mentality of the

financial sector, creating Towers of debt based on speculation.

The recent Tower of Babel, like the archetypal one, was built on illusory

foundations of symbols, or building blocks of assets that had value only so long

as people continued to deceive themselves that they had value. It was bound

to collapse at some time; the critical point occurring when the language of

communication broke down. The builders, suppliers and managers of the Tower

eventually ceased to communicate because they no longer believed the assets of

their trade, debt and liquidity have any real value.

But there are a positive effects, which may be dormant within the

complexity of the global financial network. They arise from its complexity and

independence. Perhaps we should understand the collapse of the modern Financial

Tower of Babel as signalling a critical point, opening up the possible emergence

of new languages and new