James Ledbetter joins the chorus pointing out that the massive bailout proposed by Treasury Secretary Paulson last week is basically socialism. In fact, Ledbetter says, it's the biggest socialist investment anywhere in the world ever. But in reality the plan has a lot more in common with post-USSR crony capitalism than socialism -- it's government nationalizing industry for the sake of ... industrialists. (Obviously it's not so clear cut, since even Paulson's terrible first draft will have some benefit to the overall economy.) Proper socialism would, of course, involve nationalizing industry for the sake of the proles. Ideally, Congress will insert provisions into the bailout bill that will actually benefit Main Street as well as Wall Street, and ensure that the government gets a fair shake of the profit after it stakes out the chastened capitalists of Manhattan. Thus, profit as well as risk would be socialized.
Ledbetter offers a preview of conservative rhetoric on the take-over, which will likely -- and unfortunately -- not involve questioning how their basic assumptions about the economy apply to the current crisis, but will instead continue a long conservative tradition of using socialism as a political bludgeon. Republicans have been deploying lassez-faire ideology so much for so long that this failure of the market leaves them divorced from reality, and this new plan has no place in their vocabulary. But it looks like market intervention is resurgent, and necessarily, so perhaps there will be a movement left on the "acceptable for public discourse" spectrum when it comes to talking about economic issues.
--Tim Fernholz
