All socialists now?

by John Quiggin on October 10, 2008

A couple of days ago, I thought my call for full-scale nationalisation of the banking sector would remain beyond the pale of political acceptability for at least a week. I badly underestimated the pace at which events are moving. In today’s paper I read the following assessment:

Inevitably, the US, Britain and Europe are going to end up with nationalised banking systems in one form or another, and with governments guaranteeing not only their deposits but probably all their liabilities. The nationalisation will be a temporary emergency measure. But for some time at least the systemically important banks effectively are going to be public utilities and must be regulated accordingly.

This taxpayer rescue of banking systems opens up a new and potentially very important avenue for unfreezing bank lending and restoring the flow of credit. If governments effectively control the banks, what is to stop them from demanding that they start lending again?

The source is Alan Wood, probably Australia’s most consistently hardline free-market economics commentator, writing in the Murdoch-owned Australian.

To amplify Wood’s point, the time when the situation might have been salvaged by passive capital injections like the acquisition of preferred shares has passed. Only direct public control, combined with a commitment to salvage the financial system as a whole has any chance of success.

{ 8 comments }

1

HH 10.10.08 at 4:13 am

At least we won’t have to rename Bank of America. We will also save quite a bit of salary expense by substituting dishonest civil servants for dishonest private sector employees.

2

Ahistoricality 10.10.08 at 4:54 am

As my father says, there’s nothing so permanent as a temporary solution.

So, is this a revolution? Or just evolution?

3

peter ramus 10.10.08 at 5:33 am

John, you’ll see that I called for nationalization of the financial sector at your co-blogger’s other (recently resumed) blog (at comment #12) a week ago. Naturally I’m pleased to see that someone who’s actually qualified to address the issue agrees with me.

And now I’m really worried.

4

JLS 10.10.08 at 6:43 am

“Inevitably, the US, Britain and Europe are going to end up with nationalised banking systems in one form or another”

Not in France I think.

We are a free enterprise country.:-)

5

Guest 10.10.08 at 11:28 am

Yeah, except it’s a false dichotomy nowadays. “Public” means “contracted out to politicians’ friends.” It’s really just another Republican wealth redistribution.

6

HH 10.10.08 at 12:50 pm

Any documented, deliberate, material misrepresentation of facts should be a permanent bar to appointment to government office or hiring to a managerial position. As long as liars are allowed to lead, we will be led by liars. Both Capitalism and Socialism function tolerably well when directed by honest people. When knaves are in leadership positions, both systems fail and society suffers. The great taboo in America today is to acknowledge that we have been led into this disaster by what Hunter Thompson called “A Generation of Swine.”

7

Keith 10.10.08 at 6:53 pm

I was hoping to live long enough to see the US adopt some Socialist ideas into politics, I just didn’t expect it to happen like this, or this quickly. Yikes.

8

John Larkin 10.12.08 at 11:53 am

Well, the Australian government has taken steps. Australia will guarantee all bank deposits for three years. It will also guarantee wholesale funding to Australian banks in an effort to fight the global credit crisis. The Sydney Morning Herald article pointed out that the government “… will also double the funds available for mortgage-backed securities to $8 billion to help maintain liquidity for non-bank lenders.” It is a Labor government although in recent decades the economic policies of the Labor government were more akin to those of the business backed Liberal government.

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