We don't just need to recapitalize the banks. We need to reconceptualize capitalism.
At the beginning of the century, when the United States briefly contemplated the prospect of paying off its national debt, Alan Greenspan raised an unexpected concern. A government surplus would end up being invested in private assets, which would violate free-market principle and could deliver socialism through the back door.
Greenspan smothered that dangerous surplus in its crib by endorsing the Bush tax cuts, but his benign view of derivatives and his nonchalance about the unregulated "shadow banking system" helped bring about the outcome he feared anyhow. Authorizing the Treasury Department to take stakes in financial firms is merely the Paulson plan's most dramatic departure from textbook capitalism. The legislation—which the Senate had enough sense of irony to attach to a mental health bill—implicitly recognizes that major financial institutions have become too interwoven with the global economy to be allowed to fail.
What should we call the economic model emerging from this crisis of capitalism? Despite the collectivization of losses and risk, it doesn't qualify as even reluctant socialism. Government ownership of private assets is being presented as a last-ditch expedient, not a policy goal. Yet it's inaccurate to describe our economy, either pre- or post-Paulson, as simply laissez faire. A system in which government must frequently intervene to protect the world from the results of private financial misjudgment is modified capitalism—part invisible hand, part helping hand. This leaves us with a pressing problem of both conceptualization and nomenclature.
No comments:
Post a Comment