I have been criticized for portraying the government bailout as Marxism. The question remains, as the government pours more and more money into our critical institutions, banking, automotive, etc., isn’t this a form of nationalization? Wouldn’t Cesar Chavez approve? Do we now own a piece of the action?
No matter how you view it it is not Marxism, but certainly Keynesian. Even if the government takes over the operations temporarily, no one has suggested permanent nationalization of anything.
The real suggestion has been that as the banks and car manufacturers (and possibly others; I have not heard anything) become bankrupt, the government takes them over temporarily, sells off the profitable parts and keeps the losers (toxic securities in the case of banks) until the economic weather clears. This is not the forum to debate why I think it is a good idea, but it is not marxism, which would entail the government permanently take over these businesses that have run themselves into the ground.
Incidentally, several parts of the economy are already nationalized, but no one seems to notice: defense, police, water and sewage, roads and streets, schools, … and, except for the last, no one has suggested privatizing them.
That’s not Marxism, that’s financial aid.
Oh, the loony libertarian wing suggests privatizing some or all of those, because Government Is Evil, and The Free Market Is Perfect.
And what is wrong with privatizing some or all of those? I doubt if people had to contract and for and pay an itemized bill every month to catch and jail pot smokers and their suppliers, that we would have the highest incarceration rate in the world. As it is, we have the worst of both worlds: a privatized and burgeoning for-profit criminal justice industry, disguised anonymously in your property tax payment.
I don’t see any way to keep this in General Questions. Let’s try Great Debates.
samclem Moderator, General Questions
Of course the government owns a piece of the action, and that is entirely proper. The taxpayers deserve to have an equity stake in the companies that are bailed out, so that when they recover, the taxpayer can recoup their investment.
I see no way this is equated to communism; if anything, it is capitalism in its most basic form.
When you buy stock, do you expect no return on that investment?
And actually you have a point. At least the government isn’t just nationalizing private assets like Chavez. Sure we should have an interest if we are paying for it. But why should we pay for it? Let these guys fail, let the investors lick their wounds. Everyone will be much more careful next time around, perhaps voting their proxy statements so as not to rubber stamp the recommendations of the Board of Directors, and closely scrutinizing the actions of the management. God forbid the people keep an eye on their own investments…
Because doing so would be disastrous.
And possibly watch America fall into a new Great Depression or worse.
I think everyone (even Obama!) would love to be able to do that. No one wants to pay out trillions to these bozos.
However, if we don’t bail out the big, sick banks (for example), maybe that causes the smaller banks to fail, or it takes the big, healthy banks with them. If the banking system collapses, then the small business guys can’t get a loan to continue operations, and they go under. When the small business guys start to fall apart, they stop paying taxes and lay off their employees, and now the states are hurting, etc.
Before you know it, we have bread lines and 20% unemployment.
Yes, it’s bad and presents moral hazard issues to bail out the companies that are “too big to fail”, but the alternative is worse.
So, the question you may want to ask is, how do we prevent this from happening again? Additional regulation? From the few posts I’ve read of yours, it seems you may oppose that. Does too big to fail mean too big, period? Then you’re looking to have the government step in to bust up the monopolies, duopolies, oligopolies, but there we go with regulation again.
So, what do you propose? If you say, just let the market do that work, then we’ll have to disagree – yes, the market will eventually work things out, possibly, except where there are various externalities, but the resulting economic wreckage and hardship (literally, starvation, disease, etc.) is not really something I’m interested in living through.
Hugo Chavez. Cesar Chavez was a labor organizer who organized farm workers.
Geithner made it clear in testimony yesterday ,that they will not let AIG fail. They have dumped almost 180 billion on it. Many think it is too big and important to fail. If that is true, they should take it over. The financial management on Wall St. have treated TARP like a gift with no responsibility attached or implied. At some point we will recognize they are part of the problem, not the solution.
I’ve wondered about that. Has anyone suggested making being “too big to fail” illeagal? Could it be done or would it end up being a mess. I’m guessing that it would have to be a worldwide standard, or we’d be putting American businesses/conglomerates at a disadvantage.
Is there any way to deal with “too big to fail” besides busting them up?
Bust them up or ,if they are that important, nationalize. Profit is not a spur to do the peoples work.
Well, anti-trust rules were really to prevent monopolies, not “too-big-to-fail” syndrome. I guess you could argue that the Defense Department, could, in theory, be a private enterprise and we would have considered it too big to fail, so defense has always been nationalized.
It’s possible that it’s only with the digital revolution that these super-giant companies can even operate, so that companies too big to fail is a recent (last 20 years?) problem and has not been adequately addressed.
In Canada, there are really only 5 or 6 banks, and any one of those is too big to fail. I think they’ve addressed it through more regulation. Utilities may be similar here – cannot be allowed to fail, so are heavily regulated.
To be honest, I don’t know how you would address that through pure market-driven forces. I think regulation for institutions that cannot be allowed to fail and anti-trust rules could help the situation.
Nitpick on the thread title: Apostrophes are not used to announce to the world that you know an “S” when you see one.
The basic choice is whether to let the entire economy slip into a depression by sticking to some high falutin’ principles, or be realistic and save the economy by bailing out some who don’t deserve it. Most of us don’t want a repeat of the 1930s, and if we have to throw money at the problem to make it go away, that’s just what I want to do.
This crisis is far different from the 1929 crash. It is worse on a fundamental level. In 1929 it was a bunch of investors buying on margins. This time it was allowing the institutions themselves invest at 30 or 40 to 1 margins. It was a bad idea from its inception. You can thank Gramm and Paulson for that. The financial pros who wanted that mess to happen are still in charge. We should remove the whole board and management team from AIG and start over. They claim they are justified in giving out huge bonuses now. For what, theft and incompetence.