

Why We're Not Socialists - mjtokelly
http://www.forbes.com/2009/02/11/capitalism-socialism-government-opinions-contributors_0211_andrew_rosenfield.html?partner=msn

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natmaster
He makes a claim in the title, but never argues about it.

Here is a summary:

-I like the bailouts

-Socialism is bad

-Capitalism is good

No where does he say anything about why anything is not socialism, let alone
'us'.

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mhb
His argument seemed straightforward.

He says that the government taking control of the banks isn't socialism.
Instead it is a fundamental aspect of capitalism that when equity holders
can't repay creditors, the creditors become the owners of the company. Due to
the unusual structure of banks, the government becomes the owner. Even though
the government ends up owning the bank it is not socialism because of the
mechanism through which that occurred.

~~~
anewaccountname
So if I get the gist of his argument, when an aspiring tyrant-king decides to
take over a democracy "due to the unsual structure of [congress]," the new
structure "is not [a fascist dictatorship] because of the mechanism through
which [it] occurred."

(By the way, I support taking over the banks due to their unusual structure,
the systemic risks they represent but do not properly account for due to a
tragedy of the commons problem--where the commons is the system they are a
part of--and for other reasons. I just don't think its not socialism.)

~~~
mhb
Yes. Context matters. Killing someone in self defense isn't murder.

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nazgulnarsil
"Only with law, and courts, and government power to enforce property rights
and contracts, can private enterprise work. Without that, capitalism cannot
amount to much--a system of economic organization controlled only by trust and
private forces will not thrive."

totally unjustified. the writer is counting on the reader agreeing with this
without close examination.

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gabrielroth
Can you point to a real-world counterexample -- a society with highly
developed markets but without government-based rule of law?

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russell
China 10 years ago, maybe even now. Every society has laws, but rule of law
requires that they be reliably and equitably imposed. Anytime you regularly
have to resort to bribes and shakedowns from government official to get
business permits and adjudication of conflicts, rule of law is on shaky
ground.

~~~
gabrielroth
Yes, and the further China has moved toward an equitable legal system, the
more developed its economy has become. Corruption and crime are checks on
economic activity, just as Rosenfield's original assertion would suggest.

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mjtokelly
An interesting claim I haven't seen before: nationalization of failing banks
does not constitute socialism. Rather, it's the legal--and responsible--
outcome under normal bankruptcy law.

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colins_pride
I'm not sure that the bankruptcy laws call for the nationalization of failing
banks.

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gaius
IANAL, but a bank being taken into administration by the central bank is what
_should_ happen, rather than a huge injection of taxpayer's money. Having said
that, if the taxpayer is going to do that and _isn't_ getting equity (and
wiping out existing shareholders, they knew the risks, yadda yadda) then
something has gone badly wrong.

The perfect bailout (assuming one was to happen anyway) would have been to
refund everyone a year's income tax. The money would have gone into the banks
via people's current accounts, and the rightful owners of that money, the
taxpayer, would have maintained control of what's theirs.

~~~
anamax
> IANAL, but a bank being taken into administration by the central bank is
> what should happen, rather than a huge injection of taxpayer's money.

Why are those the only two choices?

Or rather, there are other things that one might do.

Always beware someone who says that the only alternative to doing things their
way is some disaster.

~~~
gaius
Choice a is what normally happens when a company is insolvent, choice b is
what actually did happen.

~~~
anamax
Huh? The govt doesn't "normally" take over when a company is insolvent. Even
with banks, the SOP until recently was shut-down (often via sale to another
bank).

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mjtokelly
[http://gregmankiw.blogspot.com/2009/02/nationalization-or-
pr...](http://gregmankiw.blogspot.com/2009/02/nationalization-or-pre-
privatization.html) "Nationalization, or Pre-privatization?"

More discussion on the same theme.

'Bankruptcy could become, in effect, a massive bank recapitalization.
Essentially, the equity holders are told, "Go away, you have been zeroed out."
The debt holders are told, "Congratulations, you are the new equity holders."
Suddenly, these financial organizations have a lot more equity capital and not
a shred of debt! And all done without a penny of taxpayer money!'

That last sentence is a bit over-optimistic...

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njharman
Not all socialism entails government ownership there is also direct collective
ownership. To answer OA's question there are many successful countries with
socialist aspects to their economies (esp compared to US's extreme capitalism)
Europe, esp Scandinavia, China, India. The countries that mix ideologies seem
to have it the best.

This whole article sounds like a shell game just to avoid associating the
bail-out with the word "socialist" which has a ridiculously despised
reputation amongst Old White Rich Guys in USA.

And re "Why we're Not Socialists". Um, don't know what we you're talking
about. I am a socialist.

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joubert
Such lazy "arguments".

