Thursday, October 9, 2008

Revolution is in the air! American government "considering" socialism

Ok, I'm just kidding. Revolution is not in the air. But the New York Times and others are reporting that the US government is considering injecting capital directly into troubled banks -- effectively becoming owners of private financial organizations. From the Times:

Having tried without success to unlock frozen credit markets, the Treasury Department is considering taking ownership stakes in many United States banks to try to restore confidence in the financial system, according to government officials.

That is socialism -- or socialistic -- no? Many economists, for example Krugman and Calculated Risk, are for the government taking an ownership stake, not for ideological, but pragmatic reasons: it will do good for the private markets. I agree with their position, for I suspect that to cure the current collapse of financial markets something along this order will need to be done. But the debate about how to deal with this financial collapse should not completely avoid ideological concerns. For we not only want to control the collapse; we also want to come out of the collapse with conditions conducive to further economic growth. And we know that private enterprise and capitalist markets are best suited to economic growth. Ideology -- in the sense of a reflexive bias against government ownership -- is in this sense also practical.

At the risk of using a worn cliche, we should beware the slippery slope.

No comments: