As Marx and Lenin predicted, State control of money and credit is the fastest way to undermine the capitalist — or any — system, and establish socialism. If the Keynesians currently in control of the economy and who are acting as Mr. Obama's advisors would ever read The Communist Manifesto (especially number five on the list of actions to take to destroy private property . . . "Centralization of credit in the hands of the State."), they might realize why State ownership or control of the financial system is not so fine a thing as they appear to believe, and why the principles of the Just Third Way above and beyond both capitalism and socialism offers a much more rational and financially sound way of getting out of the current crisis when applied in a Capital Homesteading program.
Money and credit are again at the center of the current economic crisis. As an Associated Press report stated yesterday, the U.S. Treasury will be allowing "big banks" — those whose lending practices got them (and us) into the current mess — "more bailout funds." The debate on Wall Street seems more concerned with what form that ownership should take than with the obvious implications. No one seems to be raising the question as to whether the State should own anything, or posing alternatives to State socialism imposed through a program of nationalization of the most critical factor in any economy: money and credit.
A working knowledge of basic banking theory and a modicum of common sense, however, immediately raises questions about 1) the justification for State ownership of major (or any) banks, and 2) the necessity for a government bailout. First, of course, no one has ever adequately explained why it is necessary for the State to take control (and thus ownership) in a nationalization program that dare not speak its name. The bailout money is (presumably) taxpayer money, which suggests that taxpayers, not the State in the name of the taxpayers, should be the new owners. There are ways to do this that already exist in the law and, with a few modifications, could quickly be implemented.
Second, why a bailout, anyway? There are other remedies available, remedies that respect not only private property and contracts, but don't cost the taxpayer any money and are sound financially.
For example, most (if not all) the large banks that are in trouble are corporations. If a corporation goes bankrupt, the remedy in law (and in justice) is usually some form of reorganization. The purposes of bankruptcy are not to destroy the debtor or enrich the State at the expense of the creditors or taxpayers, but 1) to give an honest debtor a "fresh start" in life by relieving the debtor of most debts, and 2) repay creditors to the extent that the debtor has the means available for payment.
They lent money or provided goods and services in some form in good faith, and are entitled in justice to a return of their capital or other assets, all of it, if possible, a pro rata portion if not. In those instances where a creditor did not operate in good faith, the courts can come to an equitable arrangement that strives to be fair to all parties. So-called "toxic" assets can be written down or written off, as appropriate, and current shareholders (who bear responsibility for electing the boards of directors that hired the management teams who carried out bad lending practices) can have their shares cancelled or reduced in value after settling all legitimate creditor claims.
Reorganizing the bankrupt banks along the lines of an Employee Stock Ownership Plan ("ESOP")/Customer Stock Ownership Plan ("CSOP") combination is a possibility that should be considered before the State throws any more money at the problem. The ESOP already exists in law, and the CSOP could be enacted very easily, especially as a special emergency measure, simply by adding some features to existing ESOP law to extend "participation" in the ESOP to stakeholders besides employees, and calling the arrangement a CSOP. In our next posting on this subject, we'll look at how the powers-that-be might start the ball rolling on this much more rational alternative to a government bailout.
THE Global Justice Movement Website
This is the "Global Justice Movement" (dot org) we refer to in the title of this blog.
