Tuesday, March 24, 2009

Sweden, US, and Answering the Socialism Question

The economic lessons the vast majority of us received in high school and college is grossly inadequate. Most people can't answer the simple question as to whether the US is making a dramatic move towards socialism. In fact, most can't even explain what socialism is. Socialism is simply defined as "government control or ownership of the means of production." What are the means of production? You and I are, of course, as are the businesses we own and work for.

Recently and with questionable Constitutional authority, the Congress has financed (largely through fiat money) the massive taking over of numerous financial institutions. So ambitious is the government's reach, Congressional leaders are "naming names" of individuals who received bonuses from companies that garnered a bailout to an angry mob and retroactively taxing these executives in an effort to punish the businesses they claimed a commitment to protect.

Secretary of Treasury Timothy Geithner and company are not finished yet. The Associated Press are reporting that he and Federal Reserve Chairman Bernanke "sought broad new powers Tuesday to regulate tottering nonbank financial companies like insurance giant AIG, and President Barack Obama said he hopes 'it doesn't take too long to convince Congress' to grant them.'" These powers don't merely transfer to the Fed and to Treasury, but to the President himself. Furthermore "Along with the new authority to regulate and, if necessary, take over giant financial companies whose collapse might endanger the broader economy, the administration wants increased oversight and controls of previously unregulated markets such as hedge and private equity funds." The government's reach will even go into financial institutions that didn't participate in the bailout programs.

I remember when Americans were shocked back in 1979 when Chrysler successfully negotiated a bailout from the federal government that was a fraction of what GM received in January, which was a very small fraction of what the government gave in bailouts in general.

Historically, when we typically think of socialism, we think of Europe. Furthermore, the most socialistic of all the European governments is arguably Sweden, which is famous for its "cradle to grave" government programs. But recently George Bush, without Congressional approval, gave $15 billion to help bailout the Automobile industry. Sweden's government had a very different message to its struggling and iconic Saab motor company. The New York Times reported that the "enterprise minister, Maud Olofsson, put it recently, 'The Swedish state is not prepared to own car factories.'" Saab lost over $340 million last year and has begun the process of "reorganization," which is one step short of bankruptcy.

Ironically, the Washington Times has noted that "Treasury Secretary Timothy Geithner said Monday that the administration decided on its public-private plan to rescue the U.S. financial system because "we are not Sweden," the country known for nationalizing troubled banks and other sectors of its economy. We are the United States of America, we are not Sweden," Mr. Geithner said.

Geithner is right, Sweden had enough sense and, maybe a commitment to free market principles, to avoid socializing the automobile industry. One thing we know for sure is that there is no question the US is making a dramatic move towards becoming socialistic and seems to be trying to surpass, rather than merely catch up, with Europe's poster child of socialism.

Kevin Price is Host of the Price of Business, the longest running show on CNN 650 (M-F at 11 am). Eric Bolling of Fox News and Fox Business says that Price’s Blog “is very influential and moves the blogosphere.” Steve Moore of the Wall Street Journal calls Price the “best business talk show host in the country.” Find out why and visit his blog at www.BizPlusBlog.com and his show site at www.PriceofBusiness.com.

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