Goodbye capitalism

By Joshua Rosner

Published: July 15 2008 13:31 | Last updated: July 15 2008 13:31

In a capitalist economy, losers are expected to take losses and winners to gain. Private enterprise is best able to allocate capital efficiently and, where it fails to do so, markets make adjustments and capital is reallocated to efficient users. This basic tenet supports good and productive assets moving from the hands of weak players to stronger. Where this is not possible, the US system gives the government a hand in fostering that move through an efficient process called bankruptcy or reorganisation. This rule of markets and of law has always been the basis of our national supremacy in innovation and the reason ours was the world’s clear choice of a reserve currency. That was the world we lived in previously.

Our elected officials have repeatedly demonstrated that even equity holders, who are supposed to have the most subordinated claims on assets, cannot be allowed to take losses and instead believe we should all communally share in losses that result from poor allocation and risk management decisions. We have nationalised the losses from Bear Stearns through a transfer of risk on to the federal government’s balance sheet and have now nationalised the losses generated by Fannie’s and Freddie’s poor management and functionally taken $5,000bn in obligations on to the government’s balance sheet. This has been done even though every equity or debt offering of Fannie and Freddie explicitly states that these “are not guaranteed by the US and do not constitute an obligation of the US or any agency or instrumentality thereof other than” of Fannie or Freddie.

By the time we are finished with this tragic period in US economic history, the government is likely to have to choose whether to do the same for at least one more large bank, investment bank, bond insurer, mortgage insurer, multiple large regional bank, airline or car manufacturer. Given the choices we have seen from officials, who obviously have little faith in the ability of capital markets or our system of law, we will see the continued nationalisation of bad assets, placing the burden on the shoulders of the already overburdened American taxpayer.

More here.

Paulson is making the public plea to congress. People have got to make their opinions known right now!

You know FLB, for a guy that looks like (and sounds like it on social issues) a 60's radical liberal, you sure do defend and support Capitalism. Too bad there aren't more like you out there.
Communism is a BAD BAD BAD thing that fails repeatedly in history. Why do people in this country think we should try it now? IT WON"T WORK!!!!

Fully agree that the gov't., (and therefore the rest of the country you and me, and everyone else) should not be taking on this finalcial hit. We've bailed out Chystler, airlines, and others at the expense of you and I. Man, if my consulting business fails, I need to go and stick my big hand out and get a bail out too! And, Billy, this is more like socialism than communism. Still a bad thing.

It would seem only certain people get to plea thier case to a captive Senate audience. Where is the people's spokesperson on this one? I watched William Fleckenstein (sorry Bill about the spelling of your name) yesterday on Bloomsberg. They were asking him about shorting and the effects it had. He went on about how shorting is a scape goat, and no one is seeing what is really wrong. I think he'd be a decent spokesperson at this point.

A common mistake is to confuse Socialism, the economic system, with Communism, the political system. Communists are "socialist" in the same way that many Republicans are "compassionate conservatives". That is, they give lip service to ideals they have no intention of practicing.

Socialism is liberal. More people (preferably everyone) have some say in how the economy works. Democracy is liberal. More people (preferably everyone) have some say in how the government works. "Democracy," said Marx, "is the road to socialism." He was wrong about how economics and politics interact, just look at the mess we are in today, but he did see their similar underpinnings.

Communism is conservative. Fewer and fewer people (just the Party Secretary) have any say in how the economy works. Republicans are conservative. Fewer and fewer people (mostly the money people controlling the Party figurehead) have any say in how the government works. The conservatives in the US are in the same position as the communists in the 30s, and for the same reason: Their 'revolutions' (Reganism) failed spectacularly but they refuse to admit what went wrong.

Whereas Marx saw industrialized workers rising up to take over control of their means of production, the exact opposite happened. Most countries that have gone Communist have been agrarian underdeveloped nations. The prime example is the Soviet Union. The best thing to be said about the October Revolution in 1917 is that the new government was better than the Tsars. The worst thing is that they trusted the wrong people, notably Lenin, to lead this upheaval. Same thing happened in Cuba with Castro. The Soviet Union officially abandoned socialism in 1921 when Lenin instituted the New Economic Policy allowing for taxation, local trade, some state capitalism... and extreme profiteering (hmmmmmmmm). Later that year, he purged 300,000 from the party membership and therefore purged them from voting (shades of the US election of 2000 ) and fewer and fewer people were involved in making decisions. We might be getting there.

Wikipedia's quote: "Stalinism is a state in which exploitation is controlled by a ruling caste.... at the expense of the working class." This is the exact opposite of what Marx and Engels were trying to accomplish, and is precisely what George W. Bush and the Republicans are working so hard for.

Most of the Republicans/conservatives I know are basically good people, but they're gullible individuals IMHO who have spent more than 20 years burying themselves in lies needed to resolve the cognitive dissonance created by Reagan's betrayal. Reagan called the Soviet Union an "evil empire", but as we've seen it wasn't much of an empire and most of the people in it aren't particularly evil. Khrushchev repudiated Stalin after he died in 1953, but wasn't strong enough to change the system or the cult worship that kept the dictatorship alive. Republicans need to repudiate Reagan, but there is no one out there who has the guts to tell the truth. The GOP has been reduced to whining, flag-waving, lapel flag wearing and outright lying. The shame of being a conservative has never been greater.

Despite the protestations and doubts of many, Obama and the Democrats might represent a return to American values. It took the Soviet Union 40 years to rot from within before democracy took hold. Let us not wait 40 years before the Republican-controlled US rots from within. The choice is clear. To complete the circle, let me quote the last line of Reagan's 1964 speech, which has greater meaning when talking about the need to vote Democrat in 2008: "You and I have a rendezvous with destiny. We will preserve for our children this, the last best hope of man on earth, or we will sentence them to take the first step into a thousand years of darkness. If we fail, at least let our children and our children's children say of us we justified our brief moment here. We did all that could be done."

As FLB said, if we are to go down, let's go down swinging. Off my soapbox, and yes I was a 60's liberal, let the barbs fly......

If you believe all that, and others in this country do to, we are already sunk.
Call it what you want, Socialism leads to communism and vice versa. Either way, the people don't get the say, the government controls everything.

And if that's what you want, you're crazy!

Hmmm, 60s radical liberal?

I've been called a kook, a moonbat, a capitalist pig, and few other choice bits, but that one is a first.

To address a bit of the rest, socialism for corporate America more properly goes by the name of corporatism, or fascism, which is exactly what is being thrust upon us.

The left/right nonsense is now and always has been a distraction so the masses would be unaware of what their masters were doing behind the scenes. The bitter and divisive conservative/liberal 'debates' are entertaining in a schadenfreude-ish way, but now that the final turns of the corporatist screws are being turned, we really have to wake up from that tired hokum.

Just a short (or not) epilogue. All of FDR's 'New Deal' programs that began to take shape immediately after his inauguration in 1933 were VERY socialistic. Based on the assumption that the power of the federal government was needed to get the country out of the depression. Roosevelt's administration saw the passage of emergency relief programs, banking reform laws, work relief/creation programs, and agricultural incentive programs. All funded by the state for the 'Proletariat' as the Communists called them, the name given to the lowest and poorest class in the State.

Later, a second New Deal was to evolve. It included union protection programs, the Social Security Act, and programs to aid tenant farmers and migrant workers. Many of the New Deal agencies remain as institutions today. Social Security for example.

By 1939, the New Deal had run its course. In short, the New Deal programs helped improve the lives of people suffering from the events of the depression. In the long run, New Deal programs set a precedent for the federal government to play a key role in the economic and social affairs of the nation. And it takes tax dollars to fund this type of altruism. Many families also went on to amass fortunes by the opportunities they grasped from this government spending, and no one said they could not which is how it should be - Capitilism at its finest.

The GI Bill after WW2 that provided free education and low interest home loans for thousands of returning soldiers was completly govenment funded. Again a socialistic program aimed at improving the lives of the less fortunate. This spurned on one of the greatest capitilistic expansions of the US economy seen to date, all fueled by the middle class having disposable income to buy products that created some of the largest/most profitible US companies.

If the people are voting to improve their own lives, you will ultimately get some socialistic institutions from their very participation. All is not so black and white, as todays politicians would have us believe.

If I believe all what? The definitions as above?

Socialism does not breed Communism, a more apropos adjective might be laziness as it does not put up any barriers to block the laziness that is naturally inherent in man; it often does not encourage innovation or ingenuity; it can become a corrupt system when a few greedy people get tired of not being rewarded for their superiority.

Capitalism puts a laziness filter on man as it allows for the industrious to advance and will usually win out over a pure socialist system economically, and actually benefits the greater good for the most people if greed is contained by fair laws enforced against exploitation by the rule makers. It allows for more personal liberty and freedom, usually leads to more medical and technological advancement, and allows for true benevolence. It is a system which allows for the pursuit of happiness, you just have to earn it..

You are only about half right CM. But that's okay.

I sure hope you aren't for government control of our lives. But you have probably supported it without even knowing it!

Hmmmmmmmm, let me think. Me, the 'I intend to smoke my stogie in public if I have to shoot you to do it' supporting more government control. It seems a bit unlikely as I seem to live in the "It's midnight and I'm not famous/drunk/pregnant yet - does this look infected?" side of town.

My tendencies at the lake are to look for the boys & girls exchanging swimsuit bottoms; conga lines and 'fins to the left' with Jell-O shooters and pickle shots; has anyone seen Cindy’s swimsuit bottom; Becky your breasts aren't as bouncy as Suzie’s, and who's pizza is that on the transom anyway' crowd. Not an ideal place for those wanting 'government control'.

And priding myself as I do on being an accomplished avatar of the semi-nude ephemeral photo shoot, my libido usually responing like Moe and Curly had its nose in a pair of pliers..... again lends itself more to the outlaw way than to one looking to be controled by the porn police. I admire and commend those delectable spectacles of the female form who have elected to offer up their sweet, ripe, full fleshy bods (pant, pant) to us vouyers for our viewing pleasure. I for one have found that less government intervention in such pastimes is usually a good thing. But that's just my opinion, I could be wrong.

The democrats have held the legislative side of the gov't since the late 50's. Except for a short period in the mid 90s when Newt Gingrich led a Republican takeover, liberalism/socialism has been the norm. The war on poverty hasn't been won, the war on drugs is a scam, the education system has been taken over by unions that place more value on the management of the teachers than kids (there are good teachers but their hands are tied), the country is being overrun by illegal immigration from multiple countries.... on and on. And we should continue the runaway tax increases with national healthcare, capital gains increases, income, FICA? Are you SERIOUS?

Uhhh... excuse me CM.. The Dems have the been liars of record... Reagan was betrayed by the democrats in congress... Reagan raised taxes by 2 bucks,(one of the largest tax increases to that point) and the dems promised to cut spending by 1... they went back on the promise and ballooned the deficit with pork barrel crap for their constituents, re-assuring their re-election.
The revenue to the government coffers when Reagan came in to office was along the lines of 300 billion. When he left office the revenue was up to 900 billion... had the dems not re-naiged, the budget would have been close to balanced.
And I used to be a 60's radical liberal, spent many a day on Haight-Ashbury streets protesting the Vietnam War, sampling the many fine botanicals and pharmaceutical concoctions!

But, having said all I have, my brother has the best saying when it comes to the government....

RIGHT WING, LEFT WING...............SAME BIRD!

Dub-ya has been no conservative, fiscally speaking, and this mortgage, Fannie/Freddie bailout proves it one more time. Perhaps he wants his legacy to be better in the history books, fearing the revisionists that change the truth....

Pretty well put Nu!