What is socialism?
By ERIC RUDER
IN A matter of months, the global financial crisis has dramatically reshaped the economic and political landscape around the world. The high priests of global capitalism have scrapped decades of neoliberal orthodoxy, replacing their denunciations of government spending as harmful interference in the free market with calls for trillions in bailout bills and stimulus packages. “The goal is to get the engine of capitalism going as productively as possible,” Nancy Koehn, a historian at the Harvard Business School, told the New York Times. “Ideology is a luxury good in times of crisis.”1
After decades of promoting the gospel of free markets globally and deregulation at home, the push for deregulation has been replaced—for all but the most ideologically blinkered—by the gospel of state intervention. In mid-February, former Federal Reserve chairman Alan Greenspan, a zealot of free markets, deregulation, and privatization over the past four decades, acknowledged that a nationalization of at least part of the banking sector might be necessary to address the insolvency of major American banks.2 This followed Greenspan’s admission in October that the crisis, in particular the catastrophic errors in judgment by U.S. banks that precipitated the crisis, revealed a “mistake” in free-market economic models. “[There is] a flaw in the model that I perceived is the critical functioning structure that defines how the world works,” said Greenspan.3 The massive injections of capital into the banking system as well as proposals for hundreds of billions of dollars in economic stimulus spending have returned Keynesianism to a place of prestige in the debate about how to manage capitalism.
To illustrate the extent of the political transformation, it’s worth recalling that the response of many Republicans to the Bush administration’s rescue plan was to proclaim the imminent demise of American capitalism. “This massive bail-out is not the solution, it is financial socialism, it is un-American,” said Sen. Jim Bunning (R-KY) of the initial $700 billion plan to reassure holders of mortgage-backed debt and to get the credit markets working again. On another occasion, Bunning denounced then-Treasury Secretary Henry Paulson for acting like China’s finance minister. “No company fails in communist China, because they’re all partly owned by the government,” he said. “I sincerely believe that Henry Paulson and Ben Bernanke should resign. They have taken the free market out of the free market.”4
Perhaps even more compelling is the overnight conversion of Representative Thaddeus McCotter (R-MI) from free-marketeer to bailout booster. On September 29, McCotter compared the $700 billion bailout to the “horrors” of the Russian Revolution. “During the 1917 Bolshevik revolution, the slogan was ‘Peace, land, and bread,’” said McCotter. “Today you are being asked to choose between bread and freedom. I suggest that the people on Main Street have said they prefer their freedom, and I am with them.”5 But just a few weeks later on November 20, McCotter, whose district borders Detroit, showed up at a Capitol Hill hearing with auto executives to speak in favor of the bailout for Detroit’s Big Three auto manufacturers.6 It looks as if McCotter decided he’d prefer bread to freedom after all.
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