Thursday, October 9, 2008

Are Government Buyouts Socialism?

On the subject of bailouts and government buyouts or buy-ups of banks, a caveat: the objection is making the rounds that such activity is "socialism." That is not the case. Socialism endeavors to cancel out the market. When it takes over business activities, it removes them from the sphere of the market. But these buyouts are not doing this at all. In fact, they are intended not to cancel out the market but to restore it. They work within the strictures -- key among which is free ingress and egress -- of the market and seek only to get malfunctioning markets running again. Objections to this activity are certainly apropos, in particular the objection of moral hazard. But that is something other than socialism. Of course, governments can get so involved in markets as to dominate them and in so doing to render them nugatory. That is a danger to be guarded against. But the current buy-up activity is not of that sort. It may be the only thing that will work in the current crisis.

2 comments:

davidgraves said...

Wouldn't it be better to term it fascism, for it is the government securing the means of production, while leaving the ownership in the private sector. We think of fascism in the terms of Hitler's Germany, but this is more like Mussolini's Italy.

Ruben Alvarado said...

One can certainly make that argument. But I would respond that fascism entailed government direction of the economy toward specific ends, while this intervention is not intended to steer the market at all, but only to keep it functioning.