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Capitalism, Socialism or Fascism?
- American International Group
- Ben Bernanke
- Ben Bernanke
- Black Swan
- CDS
- Citigroup
- Credit Default Swaps
- Dean Baker
- default
- Fannie Mae
- Federal Reserve
- Federal Reserve Bank
- International Monetary Fund
- Joseph Stiglitz
- Mercedes-Benz
- Nationalization
- New York Times
- Nouriel
- Nouriel Roubini
- Obama Administration
- Real estate
- Reality
- recovery
- Unemployment
What is the current American economy: capitalism, socialism or fascism?
Socialism
Many people call the Bush and Obama administration's approach to the economic crisis "socialism".
Are they right?
Well, Nouriel Roubini writes in a recent essay:
This is a crisis of solvency, not just liquidity, but true
deleveraging has not begun yet because the losses of financial
institutions have been socialised and put on government balance sheets. This limits the ability of banks to lend, households to spend and companies to invest...
The
releveraging of the public sector through its build-up of large fiscal
deficits risks crowding out a recovery in private sector spending.
Roubini has previously written:
We're essentially continuing a system where profits are privatized and...losses socialized.
Nassim Nicholas Taleb says the same thing:
After
finishing The Black Swan, I realized there was a cancer. The cancer was
a huge buildup of risk-taking based on the lack of understanding of
reality. The second problem is the hidden risk with new financial
products. And the third is the interdependence among financial
institutions.[Interviewer]: But aren't those the very problems we're supposed to be fixing?
NT:
They're all still here. Today we still have the same amount of debt,
but it belongs to governments. Normally debt would get destroyed and
turn to air. Debt is a mistake between lender and borrower, and both
should suffer. But the government is
socializing all these losses by transforming them into liabilities for
your children and grandchildren and great-grandchildren. What is the
effect? The doctor has shown up and relieved the patient's symptoms –
and transformed the tumour into a metastatic tumour. We still have the
same disease. We still have too much debt, too many big banks, too much
state sponsorship of risk-taking. And now we have six million more Americans who are unemployed – a lot more than that if you count hidden unemployment.[Interviewer]: Are you saying the U.S. shouldn't have done all those bailouts? What was the alternative?
NT:
Blood, sweat and tears. A lot of the growth of the past few years was
fake growth from debt. So swallow the losses, be dignified and move on.
Suck it up. I gather you're not too impressed with the folks in
Washington who are handling this crisis.Ben Bernanke saved
nothing! He shouldn't be allowed in Washington. He's like a doctor who
misses the metastatic tumour and says the patient is doing very well.
Nobel prize winning economist Joseph Stiglitz calls it "socialism for the rich". So do many others.
Fascism?
Some, however, argue that the economy is more like fascism than socialism. For example, leading journalist Robert Scheer writes:
What
is proposed is not the nationalization of private corporations but
rather a corporate takeover of government. The marriage of highly
concentrated corporate power with an authoritarian state that services
the politico-economic elite at the expense of the people is more
accurately referred to as "financial fascism" [than socialism]. After
all, even Hitler never nationalized the Mercedes-Benz company but
rather entered into a very profitable partnership with the current car
company's corporate ancestor, which made out quite well until Hitler's
bubble burst.
And Italian historian Gaetano Salvemini argued
in 1936 that fascism makes taxpayers responsible to private enterprise,
because "the State pays for the blunders of private enterprise... Profit is private and individual. Loss is public and social" (page 416).
This perfectly mirrors Roubini's statement about the American government's bailout plan.
Remember that one of the best definitions of fascism - the one used by Mussolini - is the "merger of state and corporate power".
That could never happen in America, right?
Consider:
- The government has given trillions in bailout or other emergency funds to private companies, but is largely refusing to disclose to either the media, the American people or even Congress where the money went
- Congress has largely been bought and paid for, and two powerful congressmen have said that banks run Congress
- The
head of the Federal Reserve Bank of Kansas City, the former Vice
President of the Dallas Federal Reserve, and two top IMF officials have
all said that we have - or are in danger of having - oligarchy in the U.S.
- Economist Dean Baker says that the
real purpose of bank rescue plans was "A massive redistribution of
wealth to the bank shareholders and their top executives"
- The big banks killed any real chance for financial reform months ago
Looting
As Examiner.com pointed out
in May (it is worth quoting the essay at some length, as this is an
important concept), looting has replaced free market capitalism:
Nobel prize-winning economist George Akerlof co-wrote a paper in 1993 describing
the causes of the S&L crisis and other financial meltdowns. As summarized
by the New York Times:In
the paper, they argued that several financial crises in the 1980s, like
the Texas real estate bust, had been the result of private investors
taking advantage of the government. The investors had borrowed huge
amounts of money, made big profits when times were good and then left
the government holding the bag for their eventual (and predictable)
losses.
In a word, the investors looted. Someone trying to
make an honest profit, Professors Akerlof and Romer [co-author of the
paper, and himself a leading expert on economic growth] said, would
have operated in a completely different manner. The investors displayed
a “total disregard for even the most basic principles of lending,”
failing to verify standard information about their borrowers or, in
some cases, even to ask for that information.
The investors “acted as if future losses were somebody else’s problem,” the economists wrote. “They were right.”
The Times does a good job of explaining the looting
dynamic:The paper’s message is that the promise of government bailouts isn’t merely one aspect of the problem. It is the core problem.
Promised
bailouts mean that anyone lending money to Wall Street — ranging from
small-time savers like you and me to the Chinese government — doesn’t
have to worry about losing that money. The United States Treasury
(which, in the end, is also you and me) will cover the losses. In fact,
it has to cover the losses, to prevent a cascade of worldwide losses
and panic that would make today’s crisis look tame.
But the
knowledge among lenders that their money will ultimately be returned,
no matter what, clearly brings a terrible downside. It keeps the
lenders from asking tough questions about how their money is being
used. Looters — savings and loans and Texas developers in the 1980s;
the American International Group, Citigroup, Fannie Mae and the rest in
this decade — can then act as if their future losses are indeed
somebody else’s problem.
Do you remember the mea culpa that Alan
Greesnspan, Mr. Bernanke’s predecessor, delivered on Capitol Hill last
fall? He said that he was “in a state of shocked disbelief” that “the
self-interest” of Wall Street bankers hadn’t prevented this mess.
He
shouldn’t have been. The looting theory explains why his laissez-faire
theory didn’t hold up. The bankers were acting in their self-interest,
after all...Think about the so-called liars’ loans from recent years:
like those Texas real estate loans from the 1980s, they never had a
chance of paying off. Sure, they would deliver big profits for a while,
so long as the bubble kept inflating. But when they inevitably
imploded, the losses would overwhelm the gains...
What
happened? Banks borrowed money from lenders around the world. The
bankers then kept a big chunk of that money for themselves, calling it
“management fees” or “performance bonuses.” Once the investments were
exposed as hopeless, the lenders — ordinary savers, foreign countries,
other banks, you name it — were repaid with government bailouts.
In
effect, the bankers had siphoned off this bailout money in advance,
years before the government had spent it...Either way, the bottom line
is the same: given an incentive to loot, Wall Street did so. “If you
think of the financial system as a whole,” Mr. Romer said, “it actually
has an incentive to trigger the rare occasions in which tens or
hundreds of billions of dollars come flowing out of the Treasury.”In
fact, the big banks and sellers of exotic instruments pretended that
the boom would last forever, siphoning off huge profits during the boom
with the knowledge that - when the bust ultimately happened - the
governments of the world would bail them out.
As Akerlof wrote in his paper:
[Looting is the] common thread [when] countries took on excessive
foreign
debt, governments had to bail out insolvent financial institutions,
real estate prices increased dramatically and then fell, or new
financial markets experienced a boom and bust...Our theoretical
analysis shows that an economic underground can come to life if firms
have an incentive to go broke for profit at society's expense (to loot)
instead of to go for broke (to gamble on success). Bankruptcy for
profit will occur if poor accounting, lax regulation, or low penalties
for abuse give owners an incentive to pay themselves more than their
firms are worth and then default on their debt obligations.
Indeed,
Akerlof predicted in 1993 that the next form the looting dynamic would
take was through credit default swaps - then a very-obscure financial
instrument (indeed, one interpretation of why CDS have been so deadly is that they were the simply the favored instrument for the current round of looting).
Is Looting A Thing of the Past?
Now
that Wall Street has been humbled by this financial crash, and the
dangers of CDS are widely known, are we past the bad old days of
looting?
Unfortunately, as the Times points out, the answer is no:
At
a time like this, when trust in financial markets is so scant, it may
be hard to imagine that looting will ever be a problem again. But it
will be. If we don’t get rid of the incentive to loot, the only
question is what form the next round of looting will take.
Bottom Line
So
what do we really have: socialism-for-the-giants, fascism or an economy
which calls itself "capitalism" but which allows looting?
Ultimately,
it doesn't matter. They are just different brand names for the same
basic type of economy. All three systems allow giant businesses which
are friendly to the government to keep enormous private profits but to
pass the losses on to the government and ultimately the citizens.
Whether
we use the terminology regarding socialism-for-the-giants ("socialized
losses"), of fascism ("public and social losses"), or of looting ("left
the government holding the bag for their eventual and predictable
losses"), it amounts to the exact same thing.
Whatever we have, it isn't free market capitalism.
Note:
Yves Smith has called the financial services pay arrangement of "heads
I win, tails you lose" looting, and has also argued that our form of
capitalism is evolving into Mussolini style corpocracy, meaning
fascism. But the label most often pinned on the Obama administration is
socialism.
The bottom line is that I don't put much stock
in what socialists might label a system, any more than what fascists or
corporate looters would label a system. Whatever you call it,
if the giants get all the benefits and pawn all of the losses off on
the public, it is a very dangerous system.
- advertisements -
Facism is the merging of private corporate power with that of the state for the purpose of accomplishing the elite corporate agenda,which generaly will be an agenda contrary to the democratic will and wellbeing of the people of the state.It is vital that we remember that the facists may in fact comadere even the will of the people via the carefully crafted use of propaganda, outright lies,and or promises of great reward for the people if only they be willing to sacrifice for the greater cause.It may appear that facists are promoting the wellfare of the people,however the reality is that the people,''the common people anyway''are seen merrly as tools to be used towards the accomplishment of the facists agenda.
It is important to understand that all facist regiems are totalitarian in nature,however not all totalitarian regiems are facist.Facists always seek to mold the political structure of the state in a manner that is nearly identicle to the power structure of the corporation.Of course such political structuring makes true democratic rule impossible,and of course this is precisly the aim of the facists !
As already stated,facist elites generaly only value the people of the state for the usefullness of those people towards the accomplishment of the elite agenda.This is why facists states are nearly always intolerant of the disabled and generaly unaccomodating to the sick and elderly who are as to be expected less usefull to the facists.
For what it may be worth,I must point out the fact that facists have no greator enemy than true communists or true socialists.Facism in fact can be viewed as an extream reaction by capitalist elites to negate the imaginend or possibly real threat to capitalist order posed by true collectivist enities and idiologies.Indeed the Nazis first came for the communists,and then the Jews,because it was widly believed that the Jews,''besides killing Jesus and being shrewd buisness persons'' were responcible for the rise of communism in Europe ! I suppose if in fact you desire to claim as much of the world as possible as your own ''private property than an idiology based upon common sharing is indeed an idiology that ,along with the people who adhere to that idiology,must be destroyed.
Google Project paperclip for some disturbing insight as to facism in the land of the free.
Thanks for your time and please forgive the lousy grammer and spelling ! jamesofthecommons.
Semi-Capitalistic Oligarchy/Aristocracy.
GS, JPM, Fed are the oligarchs/aristocrats and the rest of us get what is left over or what they want us to have.
We where already warned. Federalist papers. The net effect and also Albert warned about.
This world that we have made as a result of the level of thinking we have done thus far creates problems which cannot be solved by the same level of thinking in which they were created.
– Albert Einstein
========================================
But whatever may be our situation, whether firmly united under one national government, or split into a number of confederacies, certain it is, that foreign nations will know and view it exactly as it is; and they will act toward us accordingly. If they see that our national government is efficient and well administered, our trade prudently regulated, our militia properly organized and disciplined, our resources and finances discreetly managed, our credit re-established, our people free, contented, and united, they will be much more disposed to cultivate our friendship than provoke our resentment. If, on the other hand, they find us either destitute of an effectual government (each State doing right or wrong, as to its rulers may seem convenient), or split into three or four independent and probably discordant republics or confederacies, one inclining to Britain, another to France, and a third to Spain, and perhaps played off against each other by the three, what a poor, pitiful figure will America make in their eyes! How liable would she become not only to their contempt but to their outrage, and how soon would dear-bought experience proclaim that when a people or family so divide, it never fails to be against themselves.
PUBLIUS.
The point is older and wiser, a house divided cannot stand and wisdom to the effects on avoiding the cost to not having it? Remember what happened when all did what was right in there own eye? Many can see the net effect you are seeking. What is the current American economy: capitalism, socialism or fascism? I think we already already know this and the voter does reap what he voted for. I enjoy your
work to convey reason since the absence of it is hell as we know. anom at work that you for your report
Personally, I think the term "Kleptocracy" is most apt.
Let's call it the "policy" to create a defeatable enemy. Picture John Conner fighting machines with Rin Tin Tin in Terminator. Now there's a fight club.
Kleptocracy. Plain and simple.
We endure a system that doesn't recognize the seignority in capital structure and basic contract law, while our president was a professor of law at the University of Chicago!
At a more basic level, we endure a system that rewards government redistribution more than productive activity on just about every level, including the currency.
Call it what you will, but the perverse incentives will have long lasting and possibly sinister effects on future generations. Let's hope our kids learn the right lessons from the present dumbassification of American policymakers.
Capitalism is only one part of a free market. It is only critical because if it is adversely affected, the free market feels the effect. A free market requires unfettered economic activity. Since the estabishment of our freedoms here in the U.S., there has been a relentless attempt to restrict economic freedom, in many ways and by many means. These attempts include the restriction of the many possible uses of capital. So far, the restrictions have been limited.
Three False choices.
This Corpotocratic raid on the public treasury and weakening of the Dollar is no less than Financial Terrorism, with a capital TERRORISM.
It's like putting bin Laden in as Secretary of Defense.
+10 on the false choices.
-9 on Bin Laden: he caddied for Rumsfeld (without higher aspirations).
Net: +1
It's not capitalism, socialism or fascism. In fact it is nothing modern. What it is, is feudalism, the simple, naked, crude, shameless exploitation of the land by the ruling oligarchy.
For some people there is capitalism, but not for everyone. For some people there is socialism, but not for everyone.
Fascism would be a relief from any of that. Fascism, love it or hate it, is the ideology of the loser. It means to bind, and in practice it binds all the losers into a huge political backlash movement that turns the guns on those who crudely exploited the land.
Anon, I'm working on an essay on feudalism, but am too busy to round up quotes.
Here's what I've got so far - I would be grateful for help in fleshing this out:
Yesterday, I asked whether the current American economy is capitalism of a type which allows looting, socialism for the too big to fails, or fascism. I concluded that there is not much difference between the three systems, as all allow gains to be privatized and losses to be passed onto the public.
But some people argue that all 3 terms - capitalism, socialism and fascism - are too modern. and that we are actually becoming a feudal economy.
For example, highly-regarded economist Michael Hudson (Distinguished Research Professor at the University of Missouri, Kansas City, who has advised the U.S., Canadian, Mexican and Latvian governments as well as the United Nations Institute for Training and Research, and who is a former Wall Street economist at Chase Manhattan Bank who also helped establish the world’s first sovereign debt fund) said:
Are Hudson and others who use that term right?
Well, feudalism is traditionally defined as:
The common idea of feudalism also includes ownership of land or other tangible assets.
In another essay, Hudson explains the tangible assets over which he thinks the neo-feudalists are taking control:
This is all fairly esoteric. Perhaps a more basic concept is that Goldman Sachs, JP Morgan and the other giants have taken control of credit. Specifically, we are no longer in as land-centered an economy as in feudal Europe. Today, I would argue that credit is the ultimate resource.
Whoever owns the right to create credit is like the feudal landowner or perhaps like the monarchy, since the monarch handed out land grants to the lords.
You're getting too medieval. Look at France on the eve of revolution. Tax farmers ruled along with other people who had bought monopolies from the state, not landlords. This required an extremely centralized, powerful state to accomplish, and it all went bankrupt.
Perhaps "feudalism" is not accurate. The accurate term is "ancien régime". But that's not going to be meaningful to Americans.
"You're getting too medieval".
I agree.
Slavery:
http://www.presstv.ir/programs/detail.aspx?sectionid=3510532
Anarchy at its finest.
-1. Absurd.
consider this statement:
because they can.
Fascism allright.
Fascism is also typified by rigid nationalist idealogy, racism and persecution of scapegoats, an authoritarian national security apparatus, state (corporate) control of media and aggressive militarism....
Does the shoe fit?
IMHO its Fascism or as Mussolini stated “Fascism should rightly be called Corporatism, as it is the merger of corporate and government power”. The only way I see a move away from Fascism is a viable third party with term limits as both the Dems & Reps are corrupt along with campaign finance reform and the banning of corporate lobbyists.
The only way to ever "vote" fascism out of office is the way it was done with Mussolini: hang 'em and hang 'em high....
Fascists do not go gently into that good night, my friend. With 50,000 foundations engineering the news and propaganda and with 40,000 DC lobbyists (has grown dramatically since the debate on "health reform" -- which I have yet to seen explained anywhere - sure looks like health insurance further finangling!) and 5 media-controlling corporations, few but the enlightened will ever get the message about both parties being one. People still believe that there were major differences between Carter, Reagan, Bush, Clinton, Bush and Obama of Wall Street.
you're kidding right....about voting out fascism and banning lobbyists. Hahahahha
Maybe i'm too cynical, but the corporatists or fascists or whatever have riddled our political and economic systems - they are in Dem and Rep parties and I can't see a third party or leader on the horizon. There will be no voting "them" out of office.
I don't know how long or how bad US fascism will get, but i don't think fascism ever leaves quietly and things tend to end badly.
Can you provide a historical reference of a country that has voted out a fascist regime that encompassed business and politics ?
A thorn by any other name would cut as deep. What ever we name it, it is broken beyond repair, and needs to be eradicated and then replaced.
I agree with Green Sharts, this is an outstanding piece---keep them coming GW!
Fascism, and not only in the US...
http://blog.mises.org/archives/005772.asp
Well, since there seems no way of stopping them, how long before we join them? You know, a national peoples union. Ah! I can see it now, nationwide strikes for a day or two everytime CONgress pisses on us. Consumer boycotts against targeted fascist corporations. First one there gets the golden egg. Dues only $1 a year per person. That's GOLDEN!
Most intelligent future investments: mobile guillotine trucks, to be parked on Wall Street, Broad Street and outside the halls of the US Congress.....
Facism.
The "inner circle" always gets the plums.
Outside the circle gets the pits, and the scraps.
This is the way that it has ALWAYS developed, regardless of system, over time. It's just the way that humans behave.
This is a great piece GW, probably the best I've seen at ZH. I haven't seen that many well thought out arguments on this issue in one place. I have bookmarked this one.
Credit derivatives as a controllable financial virus encircling the globe.....I dig it!
we have a plutocracy ruling little people through big government for the advancement of tyranny....
IMO: Fascist cronyism
You've got to love how the market tanks the day before the Treasury starts selling billions and billions of non-TIPS bills and notes. Coincidence? I think not.
The real point is....
What can be done about it ?
Really....WHAT ?
Well, there is this. And for your reading enjoyment.
Thank you sgt for the great read: I have provided hopefully the same enjoyment to others, and have given you due credit.
Humpty Dumpty sat on the wall,
Humpty Dumpty had a great fall.
All the king’s horses
And all the king’s men
Couldn’t put Humpty Dumpty
Together again.
Plutocracy or oligarchy, but fascism will do.
+1
This is a fabulous summation.
Regardless of what type of non-pure-freemarket capitalist system we're operating under today, one thing is both ironic and clear:
The Communist Chinese government economy does a better job at capitalism than the American capitalists.
http://vimeo.com/5522949
Outstanding Washington!!
All of the above. Thank you.
Euclid
It definitely has ceased to be Free Market Capitalism. Looting or redistributing wealth, from the middle and lower classes to the rich is endemic in all societies. But the form that it takes diifers from Communism to Socialism to Fascism to Totalitarianism. Personnally, from what I see happening in America, I lean toward describing it as Financial Fascism if we have to name it.
One other point I would like to repeat: some so-called "financial journalists" have likened the credit default swap to "buying an insurance policy on someone's home - without their knowledge - then burning it down to collect it."
This is quite misleading and considerably played down. In actual play, and since an unlimited number of credit default swaps can be written against one borrower, it is more like one thousand insurance policies written against an individual's home, and then burning down their house to collect on said policies.
Fantastic job, Washington!
"Free market Capitalism" midnitepoet??? When and where, or are you referring to the preferential trade agreement between the USA and China?
No, long before Stiglitz retracted his (Nobel Award-winning) head from his butt, Michael Parenti correctly described America as a "socialist plutocracy" - socialism for the ultra-rich with the rest of us on our own. (They've even managed to monopolize socialism along with land and capital!)
And with regard to the S&L crises, it begins with Carter's signing of the Depository Institutions and Monetary Control Act of 1980, where he overturned the anti-usury laws and monetary control regs.
The year 1993 was an important one-- the Group of Thirty (that would include Larry Summers) contacted JPMorgan about doing a credit derivatives paper. JPMorgan's response: Glass-Steagall: Overdue for Repeal.
Then we had that Derivatives Policy Group (Goldman, et al.) pushing for widespread adoption of securitization & credit derivatives, which the Group of Thirty was also extolling.
So we have JPMorgan to thank for that Credit Default Swap (Blythe Masters et al.), a new form of CDO and the BISTRO (Terri Duhon).
Of course, we have Citi to thank for the SIV - the heir apparent of the holding company - the SIV, SPV (and SPRV for the insurance industry) to hide debt, while, of course the holding company is always about hiding ownership.
Next, the two pieces of legislation to make for ultramonopolies and their ultraleveraging: the Financial Services Modernization Act of 1999 and the Commodity Futures Modernization Act of 2000 (which Brooksley Born had most presciently warned against!).
Its a travesty! Its a sham! Its a mockery!
Its a travishamockery!!!
..trashamkery
i vote: fascism
I vote fascism, with the clarification of Roman Fascism. the sargeant @ arms of the u.s.senate always ceremonially carries the fascia into the senate chambers before a session.(as did the roman lictor) you can also find the roman fascia on the wall behind the President of the Senate
and on each of the columns behind his chair.pull a dime out of your pocket and on the obverse side you will see the roman fascia. ancient rome had it's senate located on the "Capitoline" hill. one of the seven hills rome was built on. the u.s. senate oddly enough is situated on Capitol hill. last but not least,another similarity, Rome could not stand on feet of iron mingled with toes of clay and i have serious reservations about america's future abilities.
"MONEY IS THE GOD OF THIS WORLD AND ROTHSCHILD IS HIS PROPHET" BENJAMIN DISRAELI
+1
of course its fascism. Most americans have no idea what fascism is (hence that ridiculous notion of "islamofascism")