23 February 2009

Fascism Redux

Here is a good article by Michael Ledeen saying that America is becoming a fascist society. Apropos Jonah Goldberg's fantastic book, many people hold a poor definition of what fascism is. Everyone seems to have a mental image (jack-booted, goose-stepping soldiers) and equates it with Hitler or Mussolini. And it has a very poor connotation, which is well-deserved.
Are we becoming fascists?
We aren't really socialists because, despite Maxine Waters desires*, the government isn't going to take over the means of production.
But the government is going into partnerships. And government partnerships with specific firms distorts the marketplace more than any tax or mere regulation could and is, perhaps, only a little tiny step above the bottom-rung of socialism on the ladder of Really Bad Ideas.
Let's consider Citigroup. A company that didn't have enough money to survive the recent credit crunch and deemed too big to fail by our legislative overlords crawling about Washington. Citi received bail-out money in order to, you know, survive. And thankfully it was able to continue its investment in the Rose Bowl, because sponsoring football games is also just too important not to happen in this day and age.
The market system is kept strong by the introduction of new players. New players bring about the "creative destruction" that Joseph Schumpeter wrote about and that we all take for granted. Think about it this way: Clover and Sears used to be the big stores where most of anything a household would want, they could get. Sears has fallen off in recent years and Clover is no more. K*Mart became a major force in retailing, but a little shine is off its luster, too. Wal*Mart is the 700# gorilla, and many people may not like that for myriad reasons, but generally, that is good for consumers. What is better for consumers are the thousands of small stores that exist across the country (& online) that hope to knock Wal*Mart off its perch.
Thinking it can't happen doesn't make sense. Orwell wrote that people tend to think the way things are now, that's the way they're going to continue. He was writing of political culture, but it holds for business as well. Sixty or seventy years ago, many people probably couldn't image a world without Woolworth's. There is no reason to think that Wal*Mart may not be around in 2075.
But the government shouldn't do a damn thing to make it stick around or to go away, especially since it holds the police power.
Back to new players. The US government now has a vested interest in the success of Citigroup, GM, Chrysler and so many others. When the need arises for better regulation, as it always seems to, to whose benefit do you think these new regulations will fall?
Cui bono?
The new guy on the block trying to take the market-share of Citi? Or to Citi, which is 40% owned by Uncle Sam?
Government interest in and working with private industry, and the co-ordination of government & private resources which is a natural outgrowth of this cooperation, is bad for business and really bad for liberty. QED one would hope.
Now I don't think Obama is a fascist dictator and I think calling Bush one was also silly and misguided. And the lack of central control in the body of one person is what is keeping us from becoming a truly fascist state. But our legislators now have significant corporate interests outside of their constituencies, and I would think most people would see what a bad idea that is, as well.
Are we all fascists? No, I don't think so.
But we're closer today than we've been in a while. And I don't like it.

*=I wish I could find just a cut of Maxine Waters saying her idiotic, socialistic Maxine Waters things without the editing of the geniuses on youtube. This one was such a monumental brain cramp that no editorializing was necessary.


Claudio said...

Is the idea of taking over Citi or B of A any different than what the FDIC does when a smaller bank fails? The method is different but the result is the same (at least theoretically) the banks are sold off for scrap, I think... admittedly I'm not as learned in such things as you.

Sean said...

Usually when a bank fails and is shut down by either state or federal regulators (usually for not carrying the requisite reserves or otherwise failing meet its obligations to its depositors. The banks assets (the loans it has out to people) and liabilities (deposits) are divied up--I think they usually go to one bank. The FDIC assumes any losses. This is historically covered by fees paid by lenders. It is also avoidable due to routine audits performed by the FDIC and, one would hope, due diligence by management--it is typically in a firm's interest to remain in business.
The bank that falis, though, goes away. It doesn't spend taxpayer money on sponsoring NCAA bowl games and naming rights for a Major League Baseball stadium. It doesn't have the federal government buy shares in it.
Again, the real threat is the fact that the US government now has a compelling interest in the success of particular firms. And it has the power to craft legislation to the benefit of particular firms. And the police power to enforce regulations to promote the success of particular firms.
This has rendered the concept of the government as the impartial arbiter in cases of dispute ("Equal Justice Under Law")as a nullity. Think of the pigs in Animal Farm declaring that some animals are more equal than others.
Further, there are those that hold the belief that many of Wilson's & FDR's policies were quite fascistic. See Liberal Fascism by Jonah Goldberg. Mussolini, before he aligned with Hitler, was greatly admired abroad and several members of FDR's inner circle visited Stalin's USSR in the 20s to see collectivism at work.

Claudio said...

My problem with the government buying a stake is that the owners of the company are not wiped out. I'd like to see the stock become worthless and thereby make the owners responsible for the bad decisions made on their behalf. This has already happened to a certain extent with the value of the stock dropping so far. But if these companies are allowed to go under and stop working will it not also be punishing many businesses that had nothing to do with the fraud these companies committed? That's where I'm torn. I'd like to see these companies go belly up for there misdeeds but I want the innocents protected ... much like depositors are by the fdic. I don't know how to make that happen but I think that is what the government is trying to do.

I agree we don't want the government "profiting" from these companies and entering the market place that directly ... but if it's just protecting businesses that are "innocent" I think it may be worth a try, so long as it is watched very carefully...

Sean said...

One could say that the owner's were wiped out by their loss of equity. The government stepping in didn't prevent market failure, a legitimate role for the government, it prevented a more efficient allocation of resources, the role of the market.
"Innocent victims" are a part of life in investment. I'm not saying the loss of savings of people who did nothing wrong at the hands of incompetents at best and criminals at worst is no big thing. But risk and loss are part of the bargain.
The government stepping in to "fix things" or "stabilize" the market is beyond its purview and will have worse long-term effects than allowing the market to work itself out.
It also reinforces the idea of the government as a parent and reduces individual liberty and responsibility.