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the current economic crisis

November 18, 2008

Partially due to being bombarded by the corporate media’s coverage of the current economic crisis, the one that people in the know have been warning us about for years, I have been thinking a lot about economics and politics. In particular, I have been thinking about that fact that there is no perfect system. On the one hand, you have the capitalists and free marketeers who advocate a market with little regulation or oversight, and as long as the market is strong and the economy stable, everyone is happy with the status quo. This is the system that is championed by the current administration, and alternative philosophies are denigrated and slandered; that is, until the massive amount of corruption and mismanagement eroded the free market into a cesspit of credit-based consumerism that no longer has the ability to live beyond its means. Now, the free marketeers are demanding swift and decisive action from the government in the form of using tax-payer money to shore up the weakened economy by buying bad assets from failing companies, guarantying bad debts acquired by failing companies, helping failing companies merge, etc. etc. I am no expert, but that sounds less like free market capitalism and more like corporate socialism, and this coming from those that treat “socialism” like a four-letter word!

Socialism, on the other hand, is not a perfect system either. While much of what we as Americans today take for granted as being predominately Democratic and Republican ideals, things such as women’s voting rights, economic equality for African-Americans, the right to unionize, worker’s compensation for on-the-job injuries, etc., these things were actually part of the Socialist Party of America platform all the way back in 1903. Eugene Debs, tired of seeing his fellow workers suffer, began to call for economic reform. This crusade eventually led Debs to adopt socialism as the political and economic model he thought best for America’s future. But, even though Deb’s party became a means for economic and social reform, the party itself was often divided, especially on how to implement these changes. In addition, while many of the socialist ideals were good in theory, they proved to be less so in practice. Human greed often triumphed over altruism, and the plight of the poor, unemployed and others who were discriminated against remained relatively unchanged for many years (e.g., women did not get the right to vote until 1920). Suffice it to say that even though the Socialist movement in the early 1900’s did a lot to advance change, it failed in its overall objectives and slowly faded away into obscurity.

In between this economic and political spectrum, as well as without in the case of more radical groups, we have had all manner of economic and political philosophies battle it out, and none have proven to be perfect in and of itself. Where one fails or proves insufficient, another steps in to takes its place, or at the very least, to provide a “helping hand” when the bottom falls out. In this case, the free market advocates in the current administration are pushing through unprecedented reverse socialist policies that takes the wealth from the majority of the population in the form of tax-payer money and gives it to a small number of giant corporations such as AIG, Goldman Sachs (whose former CEO was, surprise surprise, Treasury Secretary Paulson), etc. deemed “too big to fail.” It seems to me that most people are missing the big picture here because they are falling for all the propaganda that is acting as a type of misdirection from what is really going on. Both the economy and the political system in this country are in need of repair. They are both “too big for their britches” and, like the Big Three, could benefit from some streamlining. Outdated models that have repeatedly failed in doing what they are supposed to do should be replaced with more current, pragmatic models that reflect the complexity of world markets.

In the short term, the government has to be honest, stop playing politics by attacking red-herrings like the “socialist” leaning of President-elect Obama, and face reality. It has been said that there is no such thing as a “free market,” that the middle-class is “the creation of government intervention in the marketplace, and won’t exist without it” (Democracy – Not “The Free Market” – Will Save America’s Middle Class), and I have to agree. Besides, no model is perfect, and all economic and political ideologies are going to be flawed in some way. One of the main reasons for this is that there is an unstable variable in the whim of the individual—in their ambitions, desires, needs, etc. It is one thing to construct abstract models and theories based upon personal ideals and observations, but it is quite another to put those abstract models and theories into practice on a larger scale. In any model, there is always going to be the possibility that each individual will end up working at cross purposes, and this can lead to things like the negation of social consensus in the case of socialism, or opening the door for exploitation in the case of capitalism, etc. In addition, we are in a difficult position in that there is no guarantee the things we have built up over years will remain solid because the whims of the individual, and consequently, the market, can change very quickly. As such, the whims of the market, in whatever form, are bound to be extremely variegated, even if somewhat predictable, and there is little chance that we are all going to agree on one model. Things like the potential for failure and the inclusion of new ideas needs to be a part of any equation.

Nevertheless, we also have the tendency to cling to things that we use to define ourselves and where we stand on certain issues, and it is difficult to relinquish those views even when faced with their failings and limitations. For example, how much solicited government interference in the market does it take for certain free marketeers to realize that they no longer hold, by definition, a free market philosophy? Their minds have changed, their actions have changed, and yet they hold the same views on the market and stubbornly refuse to acknowledge this. The same holds true for the socialist who fails to see that capitalism is not going away anytime soon, which is partially due to the fact that when socialism becomes institutionalized in the hands of the state (e.g., the Communist Party of the Soviet Union, Socialist Unity Party of Germany, etc.), it often becomes a weapon for social control and the means for economic and political oppression. Today, the economic model that is taking shape is a mishmash of capitalist and socialist ideologies that have arisen out of a pragmatic need to do something about the growing economic crisis. Neither side wants to acknowledge the other side’s contributions to the problem or the solution. That is why I think certain European countries have fared better in dealing with this crisis in that they are more open to such mixed economies, having a mixture of nationalized industries that are economically vital while at the same time permitting a free market to continue in the rest. This is not a perfect system either, but it seem to be more flexible and pragmatic when faced with such economic difficulties.

In the end, it look like we are headed for a similar system here, although the establishment is loathed to admit it. The bailout plan, as well as the unprecedented authority given the the Treasury and the Federal Reserve, is one step closer to nationalizing certain sectors without actually nationalizing them. In my opinion, this is a slight of hand that simply adds an extra layer of bureaucracy to the process of stabilizing the economy leaving the tax-payer even more unprotected. The reason is that without directly nationalizing these industries and leaving them in the hands of corrupt, greedy or just incompetent CEOs, which have time and again proven to be unreliable, our money is liable to be squandered (e.g., After Bailout, AIG Execs Head to California Resort). I am not a big fan of nationalizing certain sectors and leaving the rest to sink or swim in the shark infested ocean that is the free market, but if that is the direction we are heading in, why not do it right? With everything from companies in China putting poison in baby formula to irresponsible lending by financial institutions in the U.S., we need more transparency and oversight, period. Even though the idea of big government scares me, the role of the government is to protect its citizens, and I think that it is about time our government starts doing its job.

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