TEXT OF INTERVIEW

Kai Ryssdal: A lot of things got this economy to where it is. Greed or, more politely, the desire to make more money and have more things. Also, a lack of transparency, a lack of understanding about how all those newfangled financial instruments were going to work. Or not going to work. But on top of that there was the way we did business and how some of the players, like the banks, were and still are structured. We're going to continue today with Taking Stock, our series of occasional conversations with people who can give us the longer view of our economic situation. Management consultant Charles Handy makes a specialty of organizational behavior. And when we spoke, I asked him why he thinks we wound up in this mess.

Charles Handy: I think we got carried away, you know, at least the bankers did mainly. After all, for many, many centuries, making money out of money has been regarded as rather a bad thing. In fact, it used to be called "usury" -- it still is in the Muslim world. And that's what the banks started doing. They forgot what their proper job was, in my view, which was to take money from some people who had some to spare and to pass it on to people who could use it usefully and profitably. And they started inventing nice little products that they came up with, which basically were a way of making money out of money.

Ryssdal: But from purely a business proposition, if you can't make money giving a loan, why do it at all?

Handy: That's right, but you must make sure that you don't exceed the money that you've been given by the people who are saving it. These people went wild, actually. They went way in excess of the ratios that normally were deemed respectable -- ratios of how much money they were giving out to the assets that they were looking after. They were very keen about selling things. They weren't too keen about managing the risk, because they thought that prices would forever go up. They got carried away. It's understandable. They were young, they were sitting in front of computers, they weren't out in the real world. They were selling, you know, interesting derivative products, which were ultimately based on house prices. But none of those people selling those things had ever visited the houses, which were the basis of their assets price, you know.

Ryssdal: It seems to me the solution, when we have one of these crises, is always a variation on what I suppose you could call the "big three," right. One is increased transparency, the other is increased accountability, and then some kind of regulation. But we've tried all of those things in crises past, so what's the answer this time?

Handy: Get them smaller.

Ryssdal: Get the banks smaller?

Handy: Yeah. Get the banks smaller. I'm actually sure. Markets work well when there are a lot of players, and if one falls out, the whole system doesn't crash. When we create organizations that, in the words of some people, are too big to fail, what we really mean is we can't allow them to fail. So, I really think that we've allowed the banks to get too big. So I think the answer is basically to de-structure them. I think we'll see that happening. I think we'll see Citigroup splitting itself up into much smaller kinds of entities. I also think we really should stop everybody putting everything in one basket. I think investment banking should be separated out from retail banking. They contaminate each other.

Ryssdal: Does the government come in and regulate them smaller? Or do we wait for the market, as is happening it seems in Citigroup's case, to make them small?

Handy: Well, it'd be awful nice if the market happens, and did it, because I really don't want government poking its nose in as much as it seems to want to. But I think in the end the government has to act if the banks don't do it.

Ryssdal: What about the issue, though, of shared blame? Because, while certainly Wall Street and Canary Wharf had their share of responsibility, it's not just them. It's the mortgage brokers. It's appraisers who appraised houses at values too high. But also it's us, right? I mean, we all spent too much money, because we could.

Handy: Well, absolutely. We got carried away. I -- can I read you a quote that Adam Smith made 250 years ago, which will always please me? He said, "A profitably speculation is presented as a public good because growth will stimulate demand and everywhere diffuse comfort and improvement. No patriot or man of feeling could therefore oppose it. But the nature of this growth, in opposition, for example, to older ideas such as cultivation, is that it is at once undirected and infinitely self-generating in the endless demand for all the useless things in the world."

Ryssdal: So now what then? I mean, if Adam Smith -- who wrote "The Wealth of Nations" that we all know about -- if he's right, and we got it wrong 250 years later, now what do we do?

Handy: Well, I think governments are faced with a difficult problem. They are trying to get people to spend. But it does seem a rather un-Adam Smith idea to get people to go out shopping in order to get the economy going again. More "useless things," in other words. But in order to get that happening, they have reduced the base rate from the Federal Reserve or the Bank of England, in order to get people finding it easier to borrow. But actually there are more savers than borrowers in society. And so, of course, now the savers are not going to save because there's no incentive to it. So, I'm not sure that the solution is going to be easy to get by, and I think it'll take about three years for things to bottom out. But there may be some good news in all of that. I mean we may get back to a saner kind of world -- what Adam Smith called "cultivation" or "civilization" -- where we don't all sort of spend our life trying to make money, to buy things we don't really need to impress the neighbors, and so on. Where we actually do work -- not 60 hours a week, but 40 hours a week. Where we actually do take holidays. Where we actually get to know our kids again. Where it actually becomes smart to have a tiny car, to walk and bicycle and these sorts of things. And we may find we enjoy it actually just as much as the hectic pace that we've seen in recent years. I've often said that capitalism, particularly in America, is a very exhausting business. It tires people out.

Ryssdal: Charles Handy, thank you very much for your time.

Handy: Thank you very much. It was wonderful to talk to you.