Friday, October 10, 2008

Who are the socialists?

I've been a bit paralyzed over the past months. Paralyzed in terms of where to start this blog. Paralyzed by the sheer chaos and outrageousness of the past months in our culture, economy and the ongoing election.

So, I've decided to start here, with the latest thought to pop into my increasingly pressurized skull. Who are the socialists? Funny question in America. To be honest I don't see any real socialists in this country. . . at least not among the mainstream. Our most left leaning politicians in the democratic party are far from socialists.

But I was thinking about the question as I listened to an NPR report about the increasingly strident tone from the audience at McCain rallies. As I listened, I heard the apoplectic voice of a man shouting his outrage at the takeover of America by the socialists. By socialists, he made clear that he meant the well known card carrying aparatchiks Barack Obama, Nancy Pelosi and other assorted democrats.

Now, to be fair, it may well be that this enraged member of the increasingly odd republican "base" considers all democrats and possibly moderate republicans to be socialists. He may not be any more alarmed at the prospect of an Obama presidency than he was when Clinton took the helm or Jimmy Carter before him. This entry is not about that or about defending Obama from the brain farts of a delirious political true believer. No, my musings are about the current turmoil in the financial systems and how this has turned the current, republican, administration into a, possibly reluctant, nationalizer of businesses and massive government interventionist.

Now, leaving aside the Bush administration's eagerness to listen to our phone calls and commit all manner of gross violations of our privacy that harken back to the methods of the late governments that operated behind the iron curtain, this administration has converted, or is in the process of converting, hundreds of billions of dollars in bad debt into one form or another of government "equity" in the US financial sector. Not only that but the federal reserve has begun making loans in the commercial paper market. What's that? Well, to simplify, it means that the fed is now making loans to normal business to cover short term borrowing requirements, i.e. to make payroll or cover inventory prior to sales. In other words, the fed is now operating as a. . . bank!

Hmmmmm. . . well, that leads me to wonder what the definition of socialism is. I have my own but let's go to an objective source. How about Webster's? According to Webster's, socialism is:

"a theory or system of social organization that advocates the vesting of the ownership and control of the means of production and distribution, of capital, land, etc., in the community as a whole."

OK. I'm not suggesting that the government is planning to take over any productive companies just yet (wait until GM files for bankruptcy for that) but it is clear that a sizable portion of the distribution of capital is now becoming an ownership stake for the community as a whole, the government.

So, does that make Henry Paulson or George Bush socialists? Well no. . . at least not in the classic sense of the term. To me, the only difference between the economic actions being taken by the administration and true socialism is that a socialist government would, at least in theory, be attempting to manipulate this ownership for the benefit of the people as a whole. In the current situation it is clear that this is not the case. The Bush administration is taking pains to avoid direct government ownership or power in the firms in which it is investing. We are told that we will potentially make gains or, at a minimum, lose little when these bad debts finally mature. We are not, however, given any control or guarantees nor are we to benefit directly from the profit of companies as they recover from the current market chaos and economic contraction.

So, what we have is the socialization of the financing mechanisms and a large chunk of the risk while the upside benefit of our investment will be, at least primarily, distributed amongst the shareholders and management who led their companies to make poor investments in the first place.

This has lead to the phrase: "Privatization of the profits and socialization of the losses."

So, socialism for the elites. A redistribution of wealth but from the bottom to the top.

We the people shall become second class shareholders in failed institutions. We will be without a voice in the corporate governance of these institutions and shall have no say in the day to management of the companies, no seat on the board.

The only method remaining to us to "manage" these companies, our companies, is the broad brush of regulation, which, as we all know, is anathema to republicans. Otherwise we are left without recourse to ensure that our money is not similarly mismanaged in the next artificial financial bubble.

Compared to the truly moderate policy plans by Barack Obama and the very limited "redistribution" of wealth from top to bottom that would occur under his tax policies, the republicans are the true socialists. They are simply socialists for the benefit of the elite. And, as I recall, that's pretty much how the former eastern block was managed too.

1 comment:

qfactor52 said...

Astutely observed and well put.

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