Organizations may be imploded (e.g., employee pursuit of personal goals at the expense of employer goals) or exploded (e.g., success of competitor products / services). These intrinsic and extrinsic risks are difficult to recognize and measure using only general purpose financial reports (e.g., publicly filed reports with the SEC), though organizations routinely measure employee engagement and engage in market research through proprietary studies, internal surveys, management consultants, benchmarking, balanced scorecards, and related techniques. The real success and future benefits of these efforts may be less than their costs; i.e., by analogy, the current disbursements may not reflect the purchase of capital assets. As material risks may be hidden from investors and financiers (as well as other stakeholders), the accounting classification of obligations commonly referred to as debt becomes a common object of focus: briefly, debt may be materially understated (e.g., Enron, Lehman Bros.) or overstated (cf. cases where privileged insiders seek to purchase the debtor at significant discount from those without such understanding and privilege).
Consider the borrowing of $1,000: a part will likely be deducted for creditor’s origination fee (e.g., 1% or $10); a part will be required to be set aside for paying periodic interest to the creditor (e.g., 4% or $40). In effect, the borrower legally agrees to return more funds to the creditor than it received (net) from the creditor for the opportunity to spend funds its own way. Consequently, internal procurement decisions directly determine the economic fate of the organization and indirectly affect the well-being of its customers, clients, citizens, residents, etc. For example, the borrower’s desire to profit from this arrangement may lead it to cut labor and parts costs, thereby putting the quality of its own final products / services at risk of (comparative) deficiency to the ultimate buyer / user. In practice, decisions to spend too much | little on indirect activities (e.g., general and administrative, internal audit) and too much | little on direct activities (e.g., production, selling) are routinely managed, especially by reference to benchmarks (e.g., what is the competition doing?), trending toward increased concentration (cf. investment banking) and agreed upon homogeneity (cf. independent registered public accountant audit reports).
Concentration of market (and political) power among sellers may be experienced by buyers as movement toward sameness of value (in the parlance of statistics – regression to the mean); e.g., overall, spending $20,000 for an automobile will return similar performance specifications whether selecting a Chevy or Ford. Homogeneity may lead users to discount skilled expert reports as boilerplate, putting at risk the credibility and helpfulness of the expertise and making it impracticable for the user to compare quality (e.g., E&Y vs. PwC?)
In light of the structural difficulty of making a significant return on investment, occurrences of misleading financial engineering (e.g., Lehman Bros.), the rendering of dishonest services (q.v. bribery and kickback schemes), and the discovery of other forms of fraud and corruption are not surprising responses to the liquidity and solvency issues and existential threat induced and elevated by too much debt and unwise spending.
Addendum: arguments based on evaluating capitalism versus socialism should aim to resolve the issues of what type of organization should be charged with what obligations, and how the outputs of these organizations should be distributed; these issues should not be presented in an either / or structure. Accumulating profits under the control of small groups of individuals (q.v. modern capitalism) may not in practice be much different from concentrating decision-making in units charged with furthering the public interest (q.v. bureaucratic socialism), especially where misleading | insufficient standards of evaluation are applied (e.g., profitability, GDP). The existence of a concentration in decision-making power may adversely affect the distribution of essential benefits (e.g., potable water, affordable energy) whether the decision-making structure is purportedly capitalism or socialism. To twist a phrase: markets and component units don’t make decisions; individuals do.