Europeans and Russians are socialists. Americans are staunch capitalists. Maybe all it took was a financial crisis to reveal the slide toward socialism in America. During the Cold War, faced with a military threat from the Soviet Union, Americans would rather have died than become socialists: better dead than red. Unwittingly, we now invite socialism into our lives. Ironically Wall Street firms and large industrial corporations, the purported bastions of capitalism, have paved the way to socialism. A left-leaning Administration has been only too happy to oblige.
The Slippery Slope
The road to hell is paved with good intentions. I do not think any of the pillars of our economy intended that the country become socialistic. Each entity was merely maximizing its own position, seeking to enhance shareholder value. When financial crisis hit, our formerly capitalistic businesses could not rush to Washington fast enough to seek support, bailouts and guarantees from the government. The government was only too happy to oblige with the passage of TARP and then an alphabet soup of government support and guarantee programs. In one short crisis period from summer 2008 to spring 2009, the government ignored 200 years of American economic and constitutional history to save a group of greedy and profligate bankers and industrial corporations. The end result: we privatized profit and socialized losses.
A Factual Progression
Here are the events that have taken us on the path to socialism:
- The Federal Reserve’s active role in the forced sale of Bear Stearns to JP Morgan
- The Government seizure of Fannie Mae and Freddie Mac
- TARP: Government purchase of troubled assets from private financial institutions
- Goldman Sachs and Morgan Stanley become banks by expedited process to obtain government guarantees
- Government seizure of AIG and complete payback to private institutions for credit derivative losses
- Federal Reserve intervention in broker mergers, with guarantees against losses (Washington Mutual with JP Morgan, Wachovia with Wells Fargo)
- Federal Reserve intervention with $1.3 trillion in loans to companies outside the financial sector (GE).
- Government removal of management at GM and Chrysler
- Restrictions on executive pay for banks receiving bailout funds
- Government restrictions on foreclosures unless there has been a Home Affordable Modification Program review.
- Administration desperation to pass comprehensive health insurance program. See Timeline:Global Economy in Crisis
How Did We Get Here?
We invited the devil in the door. Banks claimed that they could not withstand loan and derivative losses. Unemployed Americans wanted extensions in unemployment benefits and stimulus programs. Nobody wanted to see the stock market crash and their portfolios and retirement plans decimated. Big business wanted the profit opportunity in universal health care coverage. Insurance companies did not want to hurt their policy holders. Auto workers wanted to maintain their rich union contracts. The litany goes on.
Once we were a brave, independent and self-reliant nation. Now when adversity strikes our first inclination is to blame others and call Washington for a bailout or a handout. I do believe in the concept of welfare. Welfare was meant for the truly dire circumstance, the impoverished citizen. Welfare was not meant for auto workers to maintain above market wages and job guarantees, banks to get paid in full for risky derivative bets, GE or GM, homeowners who falsified their income disclosures to remain in McMansions or every insurance policy to be paid in full.
Capitalism is about freedom, risk and failure. Without failure there can be no progress. The slide toward socialism is an escape from freedom and ultimately an end to progress.
My European immigrant grandfather lived through the Depression, World War Two, and into the 1980’s. He once told me he was most proud that he never went on relief (welfare). We should return to the ways of our forbearers, regain our mettle and become too proud to ask for a handout or bailout. Our freedom and that of our children depend on it.
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