Tuesday, September 16, 2008

Another Potential Billionaire Bailout, or, Second-Hand Woes

Recent events are consistent with the mistaken notion that Wall Street — essentially a second-hand shop for corporate debt and equity — runs the economy. Yesterday's announcements that Lehman Brothers has declared bankruptcy, Merrill Lynch has been bought out by Bank of America, and AIG is in trouble, is a case in point. People seem to be taking it as a sign that the economy is in utter ruins, with virtually no hope for anyone unless the federal government takes over and runs things as they ought to be run: as a State monopoly. As Lord Keynes declared in his General Theory of Employment, Interest, and Money (1936),

"The State will have to exercise a guiding influence on the propensity to consume partly through its scheme of taxation, partly by fixing the rate of interest, and partly, perhaps, in other ways. Furthermore, it seem unlikely that the influence of banking policy on the rate of interest will be sufficient by itself to determine an optimum rate of investment. I conceive, therefore, that a somewhat comprehensive socialization of investment will prove the only means of securing a approximation to full employment; though this need not exclude all manner of compromises and of devices by which public authority will cooperate with private initiative. But beyond this no obvious case is made out for a system of State Socialism which would embrace most of the economic life of the community. It is not the ownership of the instruments of production which it is important for the State to assume. If the State is able to determine the aggregate amount of resources devoted to augmenting the instruments and the basic rate of reward to those who own them, it will have accomplished all that is necessary." (V.24.iii)


In other words, as long as the State tells us who can own, what they can own, and how much any owner can make off of his or her investments, everything will be okay. Other than this, there is "no obvious case" (as opposed to "unobvious cases"?) that can be made out for socialism.

Keynes' proposal — and the recent spate of bailouts — is socialism. Period. Karl Marx clearly stated the essence of socialism in The Communist Manifesto (1848): "The theory of the Communists may be summed up in the single sentence: Abolition of private property." When the State says who can own, what they can own, and how much an owner can make, the State controls ownership of the means of production. Property is control in all codes of law, and Keynes' program abolishes private property in the means of production by putting control in the hands of the State.

The bailouts of Bear Stearns, Fannie Mae, and Freddie Mac, the potential bailout of Lehman Brothers, and the demands for intervention in AIG are all examples of State control of the financial markets. The irony is that none of it was necessary. By implementing any of the proposals made by the Center for Economic and Social Justice ("CESJ"), the economy could be put back on a sound footing without the need for the State to do anything other than provide the legislative structures necessary to allow Capital Homestead Accounts, Community Investment Corporations, Homeowners' Equity Corporations, a reformed tax structure, funding for Social Security and Medicare, end the war in Iraq, and so on. All the rest could be accomplished in the private sector, without burdening the taxpayer with any more debt; in fact, by opening up opportunities for ordinary citizens to gain an adequate and secure income through ownership instead of restricting them to wages.

Will the lengthening list of financial disasters finally wake people up to the need for non-Statist reforms? That remains to be seen. In the meantime, go to the CESJ web site, start studying the proposals, and get the word to any and all candidates for public office.

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