While many of us are worried about our 401k plans, houses and jobs, something even more fundamental is beginning to find its way into our discourse – the future of capitalism. This somewhat unsettling conversation has begun to bubble up to the surface as we try to understand the roots of the current economic situation and find solutions that stick.

While we throw bailouts, stimulus packages and anything else we think has a chance of reversing fortunes against the wall, we are still left with a sickening feeling that the darkness of the current downturn may not lend itself to any quick fix. 

In fact, the banking crisis, the Bernie Madoff ponzi schemes, sub-prime mortgages and toxic assets might be only manifestations of something larger, more systemic, and more problematic than anything we have even imagined. We saw a glimpse of what this might be in the meltdown in Iceland last month. But in truth we are still absorbing the reality of what is unfolding in front of us and holding out hope – but not much beyond that.

Most of us are either too young or not quite old enough to have a good perspective on the global economy and the forces of globalization that have shaped and characterized the world we know.

The freeing of markets has unleashed many unintended consequences not envisioned by the architects of global capitalism. Key issues ranging from the growing inequality gap, persistent poverty and negative consequences of loose regulation to environmental degradation  and chronic corruption are increasing the call for a  re-examination of the current state of capitalism and challenging us to create a version that can better address these issues and build in different trade-offs.

While many have prospered over the past two decades through global capitalism – more than a quarter of a billion people pulled out of poverty in China in the past decade – too many are sinking further and further into persistent poverty.

There are in effect a series of cracks appearing in the foundation of capitalism, cracks that need to be seriously examined. Perhaps, as Bill Gates suggested last year at Davos, it is time for creative capitalism. We need new approaches that can build on the aspects of capitalism that have worked so well, while finding new ways to offset the downsides that have opened up the fissures in our society.

Fareed Zakaria penned a very interesting and provocative piece last month in Newsweek – “Can Capitalism be Saved” - that generated a great deal of comment and reaction. In looking over the landscape Zakaria, like many others, observed radically new and by some measure troubling developments.

Banks and automobile manufacturing are being bailed out by the government. New interventions into the housing industry portend a much increased government role than capitalism as we have known it would have ever tolerated. Credit markets are broken and trust in the financial and banking systems are about as low as they can go. Even the nationalization of banks has become a viable option in some quarters. Look out, here comes socialism.

But one of the benefits of the crisis is that it allows a more open and honest examination of the social and economic systems that underpin our societies. And the very nature of capitalism should be the subject of much discussion, since the underlying principles and assumptions of capitalism are being turned on their head. By some measures the very notion of government bailing out the private sector is contrary to the basic concept of capitalism, and from other perspectives signals its end.

The current crisis has brought government and its role back to the top of the agenda. While waves of globalization had kept government in a subservient role, the new environment prompts calls for government to lead and legislate the way forward. The political system seems to be where the muscle and the answers are coming from, and that is not something we have seen in capitalism in theory or in practice for quite some time.

So how can we begin to understand what led us to this point in time and what will lead us to the next iteration, modification or even new paradigm of capitalism?

Opinions and theories abound. Perhaps it has been more about the excessively weak role of government than it has been about the corporate sector. On the other hand, have we been witnessing the evolution of an extreme capitalism over the past decade that is now undergoing a long overdue correction? Does capitalism need a few tweaks or a radical overhaul?

Under any scenario some things are clear.

The extremes of capitalism will be tamed and modified primarily through additional internal and external oversight. Externally, some form of oversight will have to emerge to address the excesses that have led to the current meltdown. The coming debates in Congress, unlike the rush to Sarbanes-Oxley to quickly fix what was termed the bad apples of Enron, will have to open up a more complex dialogue. Hopefully this will result in new oversight mechanisms and governance principals that will not depress and snuff out the amazing innovation that capitalism brings to the table, but is able to create better incentives and brakes to insure a more sustainable model.    

Internally, business must adapt more quickly and more pro-actively to the twin forces of transparency and accountability. The public and media focus on excessive compensation, bonuses, corporate jets and the like speaks to the fact that too many business leaders are blind to the new operating environment and the new expectations of business as citizen. The culture of self is now bumping headlong into the demands of society.

Boards and executive suites have to become more open and engaged with key stakeholders and not excessively focused on the single metric of profit. In addition, business must be more agile in incorporating the new measures of reputation, authenticity and accountability into their operating models. Value creation and sustaining business in the 21^st century require a very different governance and business model, one that creates effective relationships and works closely with a range of key stakeholders, creates a transparency and accountability that speaks to the values of the company, and develops new standards and metrics of business success.

There is little doubt some form of capitalism will emerge from this work out – after all, what’s the alternative? Capitalism, for all its weaknesses and defects, still is better in the long run than other economic systems.

It is increasingly clear, however, that capitalism as we know it in the United States is neither viable nor sustainable in its current form. We are headed into a long overdue re-examination of what is working and what is not, and moving toward a new iteration.

The question is whether it will be the creative capitalism that Bill Gates envisioned, or some new conceptualization that brings a more even sense of justice and equity, and a new form that will create a true model of sustainability. 

Time to get engaged in the debate.