Capitalistic Socialism
By
The dreaded “S” word - somehow it always seems to be moved to the front burner at election time with dire warnings to protect the United States from its evils by supporting a “free,” “open” and “unbridled” marketplace. Everyone has bought into the concept only to learn that the way it has been structured has brought us a new form of Socialism based on Capitalism.
Economists seem to have become the new alchemists of the modern era. They study charts and graphs and manipulate numbers from a wealth of government data banks about what happened in the past so that they can forecast the future. They speak in a language that only other economists seem to understand and have academic degrees from the finest universities in the world.
Allan Greenspan was their chief priest.
While Mr. Greenspan was guiding the economy of the
Last week we found out that Mr. Greenspan himself did not understand what he was saying.
What was missed by everyone during the deregulation binge we have been on was the human factor. This is not surprising. Idealism has always been a blinding light.
The human factor was lost in the flash.
The belief that a free, open and unregulated marketplace will yield prosperity and benefits for all citizens is fatally flawed. The basic concept of the modern corporation is the maximization of profit. The profit drives the stock price. The stock price has become the primary manner in which corporate executives are paid. The less competition, the greater pricing power the corporation has and the greater the earnings it can achieve.
What is shocking is that our economic gurus actually believed that corporate executives would not take actions, for the sake of their own personal gain, that would put their companies in jeopardy. They believed that companies and industries would be best at regulating themselves for the benefit of the overall community.
So what has happened? The “Too Big To Fail” concept has taken over the economy. By “Too Big To Fail” we really mean too big to be “allowed” to fail.
In the financial world, we have permitted one bank after the next to acquire its neighbor; we have permitted commercial banks to merge with investment banks and then with insurance companies.
We have seen the philosophy evolve that as long as there is
more than one bank in a community its okay to have all
the others merge. We now have four banks in the
Take the oil and gas industry, mergers and acquisitions have
been rampant over the last 20 years. Could the
And the Pharmaceutical industry, could we let Pfizer or Merck or Johnson and Johnson go down?
Our answer thus far has been to stay out of the way and let them find another company to take them over. But that reduces competition; makes the surviving company even more important to the overall economy and “Too Big To Fail.”
We have been so afraid of Socialism, of government being involved in the commercial sector, we have created a world in which the government MUST be involved in the commercial sector.
While the current economic crisis was precipitated by predatory actions by financial companies directed against individuals, it was exacerbated by bad practices and outright fraud due to a “free” marketplace that was taken advantage of and abused by companies too large and diverse to be controlled.
Capitalism thrives when competition is maximized and is able to move freely within a marketplace but human beings will always try to get an edge and they will always take advantage of a weakness anywhere in the system, especially if there is personal glory to be achieved, either monetarily or historically. For Capitalism to survive, governments must set and maintain a level playing field and, in effect, control key industries until meaningful order and competition can be restored. If that amounts to Capitalistic Socialism, then so be it.
© 2008 Timothy Holland First
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