Will the Bush Administration’s 700 billion US dollar bailout plan forever change the US economy from a free market economy to a tightly government controlled command socialist economy?
By: Ringo Bones
Ever since the eventual approval by the US Congress of the 700 billion dollar economic bail out plan to shore up America’s ailing economy in the wake of the failure of the country’s two largest equity loans provider – namely Fannie Mae and Freddie Mac. Many an opinion of the US Government’s 700 billion dollar economic rescue plan range from comparisons to the Bush Administration’s March 2003 invasion of Iraq - which could eventually result in a “Financial Abu Ghraib”. To the very radical transformation of the fundamental sociological / religious / ideological underpinnings of Wall Street’s perception of what free market capitalism should be.
Ever since Wall Street became a global financial powerhouse, the values that made it work are grounded not only in economist Adam Smith’s idealized version of capitalism. Capitalism that is not only centered on the fundamentals of a free market or laissez-faire economy, but also of the Protestant Work Ethic in which many a filthy-rich American patriot ascribes to the reason why the United States defeated the Soviet Union during the Cold War.
The bad news about free market / laissez-faire capitalism is that unlike Friedrich Nietzsche’s “warrior-poets with enlightened self-interests” of yore - who happen to be very good at self-policing / self-regulating. A laissez-faire economy appears to be unable to regulate itself. That’s why every economist from John Maynard Keynes onwards adopted a policy of government involvement in regulating the fundamentals of the free market economy to avoid it from cycling between the extremes of financial / economic bubbles that will eventually lead into a deep economic depression.
But regulation can also be taken so far. Like the idea of the Socialist Command Economy where only a few people – especially political party cronies – can get very rich. A case in point is one economist visiting the post March 2003 invasion of Iraq had labeled the country’s Saddam Hussein-era economy as a Socialist Command Economy, which – according to him - should be retooled as soon as possible for the good of the country. Though I wonder why Iraq’s crude oil rich neighbor Kuwait had lend 300 billion dollars to Saddam Hussein to fund their war with Iran during the 1980’s given that Socialist Command Economies tend to be given a low credit rating by the world’s leading credit rating agencies.
But isn’t the lack of regulation the root cause of our global financial crisis? Sadly the answer is yes because banks and other financial institutions are prone to adventurism when it comes to making money – i.e. the least effort for the greatest amount of profit. Which eventually is an anathema to the Protestant Work Ethic that everyone at Wall Street embraced in the first place. The easy money in which those who bought in early on credit default swaps, collaterized debt obligations, mortgage backed securities and other very complex financial instruments’ speculative bubble. Financial instruments whose sheer complexity supposedly will generously generate profits on it’s own accord (?), now increasingly looks like a multi-billion dollar pyramid scheme that ran our fragile global economy to the ground. Looks like we now badly need government leadership with the wisdom to distinguish between John Maynard Keynes and Karl Marx.