Government Intervention


fdr-govt-intervention

 The economic models of socialism, capitalism, and European-style socialized capitalism are under pressure given today’s economic realities.  In a global economy, where we are all inerconnected and inter-dependent, the reality of which model will be most effective in attending to our issues is murky at best.  John Byrne (Business Week’s publisher) sums it up best, “[t]his is the first financial crisis of the global age. There is no clear map to deal with it”.  When left to its own devices with minimal (or ineffective) governmental regulation it appears that the US capitalistic, free-market model can lead to short-sighted and self-serving decision making, that while fostering ingenuity, rapid development and competition can also lead to gluttony, abuse, and bottom-line fixations that are self destructive.  This over-inflation of the proverbial bubble, which of course will inevitably burst, tends to then eliminate a great amount of the progress and advances made by the capitalistic framework.  On the other hand, there is the socialized capitalism model that comes with increased government intervention, which I see as leading to less innovation, competition and growth, making it a minority shareholder in the global economy and allowing a purely capitalistic society to overtake it, and in doing so drag it into the bursting bubble. 

With our TARP $700 BN bailout fund, the first 1/2 of which went to partially nationalize banks, AIG, and temporarily bailout automakers, we seem to be proceeding full steam down the path of becoming France.  Moreover, Citigroup is essentially in government receivership.  Now, although I agree wholeheartedly with President Obama that the Wall Streeters (from technically bankrupt entities that have been propped up by taxpayer bailout funds) that paid themselves 2008 bonuses while receiving bailout funding are shameful and should be brought to account for their actions, the stance that our President is taking is a clear case of government dictating to private commercial entities how they should operate and compensate their employees, and that is about as close to socialism as we have come.  So what is the best way to go about this?  Is it necessary for the government to intervene to this extent or not?   I guess I am advocating for a managed (or regulated) capitalism as opposed to a socialistic capitalism.

Please comment.

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