It was Joshua Rosner, writing in the Financial Times on Tuesday, who said it best. “In a capitalist economy, losers are expected to take losses and winners to gain.” But that’s not the way it works today, is it? More than three Decades ago, Richard Nixon famously said: “We’re all Keynesians now.” In 2008 we can go further. If George Bush had Nixon’s grasp of affairs, he would be forced to admit: “We’ve all become socialists, despite our lip service to the free market.”
Rosner says we have begun to nationalize bad assets. From there it is a small step to the nationalization of good assets. In fact, the two things logically entail one another. As Rosner asserts, we have officially lost faith in the market. We have lost faith in the source of our prosperity. We no longer abide the creative destruction of the market process. We do not want the suffering that naturally attends real growth. Good things and only good things are demanded. Losses are unacceptable, even though these always attend genuine achievement. Everybody has to be a winner. In today’s school system we find no child left behind, which exemplifies the ongoing catastrophe in American education.
The logic of late capitalism (the declining form of capitalism) calls for the elimination of all suffering (and therefore, the elimination of real growth). This program is the basis of latter-day social democracy, which opposes the market because pain and tragedy are normal to the market system. Social democracy wants a world without failing corporations or banks. It is no wonder, then, that step-by-step they have ringed the market with “protections.” Today’s social democrat (and compassionate conservative) wants the benefits of the market without the pain of market process. The Austrian economist Ludwig von Mises once wrote: “Men must choose between the market economy and socialism. They cannot evade deciding between these alternatives….” No pain, no gain.
So there you have it. A decision has been made (and nearly everyone agrees), that pain must be nationalized. Ergo, bad assets must be nationalized because bad assets involve pain. Someone somewhere figured out that nationalizing a thing makes it go away. Take, for example, health care. You nationalize health care and it’s gone. You nationalize any industry and it withers away. Apply this redistributionist principle to all human suffering and, well, you have socialism.
The process is logical, based on the human desire for a free pass. And so, we nationalize the losses from Bear Stearns. The FDIC kicks in over IndyMac. Taxpayers must pay for the mega-blunders of Fannie and Freddie. Where will it end? The redistribution of liabilities is the first step. Let everyone hurt a little, with responsibility shifted onto everybody (i.e., nobody in particular). Say goodbye to pain, but also say goodbye to the U.S. dollar.
The collectivization of financial loss necessarily entails the collectivization of financial profit. As for freedom itself, the system of government brought in by the Founding Fathers cannot survive a general acceptance of Bolshevik financial practices. According to the Austrian economists, Ludwig von Mises, “Every step a government takes beyond … protecting the smooth operation of the market economy against aggression … is a step forward on a road that directly leads into the totalitarian system where there is no freedom at all.”
If only the Bolsheviks had understood the reach of their principles in 1917. Think how differently they would have handled the early Soviet period. Their tendency was to bring about socialism in the clumsiest, most violent way. They put the cart before the horse, got angry when the cart didn’t move and shot the horse. None of this was necessary. All they needed was to wait for bourgeoisie to self-tenderize.
The Bolsheviks didn’t need to storm the Winter Palace or starve the Kulaks. Purges and show trials were completely out of the way. All one needed to create a Union of Soviet Socialist Republics was patience. The capitalists themselves, weakened by their own promotion of hedonism, would inevitably seek refuge in the nationalization of investment risk. Thus, socialism would be installed at one stroke in the name of saving capitalism. There was never any need to arm the proletariat or hang businessmen on street lamps. The businessmen will hang themselves, in due course, by demanding a Soviet style of government. The proper ingenuity of the Communist is nothing more than the anticipation of his victim’s suicidal impulses.
One only has to wait for the FDIC to detonate beneath a floundering Republic. If anyone thought U.S. Treasury bonds are a riskless investment, think again. Am I suggesting the U.S. government will default on its obligations? In my opinion, no other outcome is imaginable. If you doubt this conclusion, try to imagine federal, state and local government paying off $10 trillion. It’s not going to happen, as the readiest method of default open to government is the debasement of the national currency. This means an end to American international power – financial and military. It means an end to the old international order, which has existed since 1945.
It means global revolution. Wave hello to socialism.
