Recently, looking over some of my left-leaning, socialist wife’s reading material, I happened on a call to arms flyer from the Workers World Party. The flyer had these bullet points: “Karl Marx was right” and “Why Capitalism is Doomed to Fail”.
Larry Holmes, leader of the Workers World Party will speak about factors behind the worldwide capitalist economic collapse, why capitalism cannot solve its basic contradictions and about the growing demand to bail out workers and not Wall Street. Mr. Holmes will explain why socialism, an economic system run by workers, plans production to meet human needs and not profits for the rich, can provide jobs, housing, health care, education and a comfortable life for everyone free from racism, sexism and oppression.
For one that loves and studies history on a continuing basis, this is just a fabulous time where I get to see history in the making but also history as part of a recurring cycle.
We obviously have heard all this before. Communism made some grand promises, quite similar to the above mentioned flyer. We all know what happened in countries espousing the Communist Economic Theory and yet here we go again? All those years of unrivaled prosperity making us the richest nation among nations ever and here we have a bump in the road and people want to toss the system?
Our capitalist system of laissez faire (minimal government interference) and open markets has hit a snag lately, a really big snag and knowing the reasons why will help get us moving again.
I am a capitalist who believes in the system and the system has proven itself time after time but have we tinkered with the system to the point where its principals have been compromised? Well, I think so.
My wife thinks capitalism is such a cold, uncaring system where risk taking is rewarded with monetary success without regard for the welfare of the greater society. I will admit to that but in the long run, it is the success of the risk takers that benefits society as whole the most and socialism, in the end, rewards only the slackers in our society that are taken care of no matter what they contribute to society.
I submit that it is our socialist tendencies (among other factors to be mentioned later) that contributed to the economic problems we face now. Our misguided good intentions are to blame and not the capitalist system.
Everyone now knows that it is the housing / mortgage market boom that was the iceberg that our economy ran into. We wanted all Americans to share in the joys of home ownership and so our government encouraged lax mortgage lending practices. They formed Freddie Mac and Fannie Mae, quasi governmental agencies to buy up these mortgages, basically creating a market for mortgages. Since Freddie and Fannie were ostensibly backed by the wealth of the US Government, they could borrow money to buy up those mortgages at rates that were not available to regular business entities.
Builders and developers saw the demand for homes skyrocket since now, everyone could be a home owner; the building and buying boom started.
The huge bubble created by the housing boom was not sustainable and burst when those borrowers that should never have been allowed to borrow, defaulted on their loans. The homes lost to foreclosure were then sold at auction at pennies on the dollar which in turn created a surplus of available properties at lower and lower prices bringing the value of all homes down.
This would never have come to pass if the capitalist system was allowed to work on its own.
Our government created the housing bubble when it allowed and encouraged subprime lending. Under normal circumstances, only those borrowers that were deemed capable of paying off loans would be allowed to obtain mortgages. Some may say this is a cold process but we, as a society, must believe that some people will never be home owners and only renters, as a fact of life.
Also, our government created Freddie Mac and Fannie Mae, uncontrolled financial institutions that could never exist and should never exist under a capitalist system. These institutions did not play by normal rules; they were accountable to no one and grew into monsters.
I guess what I am saying is that our government is ultimately to blame for our current situation. It interfered with a system that calls for minimal to no government interference and in so doing, corrupted the very principals our economy is based on.
When I say “our government”, I suppose I need to break it down to specific parties or individuals. Actually both parties are to blame but the Democrats probably a little more.
Democrats are socialist by nature and loved the fact that poor people were being allowed to be home owners. Republicans by nature defend capitalism but turned their heads away and let the Democrats inject their socialism into our non-socialist system.
In fact, Senator Chuck Hagel (Republican) had a bill pending that would rein in Freddie Mac and Fannie Mae but, if you can believe this, Fannie and Freddie hired high power lobbyists to sway the Republican vote against the Hagel bill. That lobbyist is now working for John McCain.
Larry Holmes, leader of the Workers World Party will speak about factors behind the worldwide capitalist economic collapse, why capitalism cannot solve its basic contradictions and about the growing demand to bail out workers and not Wall Street. Mr. Holmes will explain why socialism, an economic system run by workers, plans production to meet human needs and not profits for the rich, can provide jobs, housing, health care, education and a comfortable life for everyone free from racism, sexism and oppression.
For one that loves and studies history on a continuing basis, this is just a fabulous time where I get to see history in the making but also history as part of a recurring cycle.
We obviously have heard all this before. Communism made some grand promises, quite similar to the above mentioned flyer. We all know what happened in countries espousing the Communist Economic Theory and yet here we go again? All those years of unrivaled prosperity making us the richest nation among nations ever and here we have a bump in the road and people want to toss the system?
Our capitalist system of laissez faire (minimal government interference) and open markets has hit a snag lately, a really big snag and knowing the reasons why will help get us moving again.
I am a capitalist who believes in the system and the system has proven itself time after time but have we tinkered with the system to the point where its principals have been compromised? Well, I think so.
My wife thinks capitalism is such a cold, uncaring system where risk taking is rewarded with monetary success without regard for the welfare of the greater society. I will admit to that but in the long run, it is the success of the risk takers that benefits society as whole the most and socialism, in the end, rewards only the slackers in our society that are taken care of no matter what they contribute to society.
I submit that it is our socialist tendencies (among other factors to be mentioned later) that contributed to the economic problems we face now. Our misguided good intentions are to blame and not the capitalist system.
Everyone now knows that it is the housing / mortgage market boom that was the iceberg that our economy ran into. We wanted all Americans to share in the joys of home ownership and so our government encouraged lax mortgage lending practices. They formed Freddie Mac and Fannie Mae, quasi governmental agencies to buy up these mortgages, basically creating a market for mortgages. Since Freddie and Fannie were ostensibly backed by the wealth of the US Government, they could borrow money to buy up those mortgages at rates that were not available to regular business entities.
Builders and developers saw the demand for homes skyrocket since now, everyone could be a home owner; the building and buying boom started.
The huge bubble created by the housing boom was not sustainable and burst when those borrowers that should never have been allowed to borrow, defaulted on their loans. The homes lost to foreclosure were then sold at auction at pennies on the dollar which in turn created a surplus of available properties at lower and lower prices bringing the value of all homes down.
This would never have come to pass if the capitalist system was allowed to work on its own.
Our government created the housing bubble when it allowed and encouraged subprime lending. Under normal circumstances, only those borrowers that were deemed capable of paying off loans would be allowed to obtain mortgages. Some may say this is a cold process but we, as a society, must believe that some people will never be home owners and only renters, as a fact of life.
Also, our government created Freddie Mac and Fannie Mae, uncontrolled financial institutions that could never exist and should never exist under a capitalist system. These institutions did not play by normal rules; they were accountable to no one and grew into monsters.
I guess what I am saying is that our government is ultimately to blame for our current situation. It interfered with a system that calls for minimal to no government interference and in so doing, corrupted the very principals our economy is based on.
When I say “our government”, I suppose I need to break it down to specific parties or individuals. Actually both parties are to blame but the Democrats probably a little more.
Democrats are socialist by nature and loved the fact that poor people were being allowed to be home owners. Republicans by nature defend capitalism but turned their heads away and let the Democrats inject their socialism into our non-socialist system.
In fact, Senator Chuck Hagel (Republican) had a bill pending that would rein in Freddie Mac and Fannie Mae but, if you can believe this, Fannie and Freddie hired high power lobbyists to sway the Republican vote against the Hagel bill. That lobbyist is now working for John McCain.
Janusz,
ReplyDeleteI read this article in great interest as I seem to delve into economics more and politics less as I age. I would say that I am probably more left of center, but what I see is that capitalism and socialism cannot stand alone. Every country has both existing in their culture. Pure capitalism/socialism only exist as definitions in textbooks. In reality, capitalism is at one end of the spectrum and socialism at the other (right/left whatever!). In between you find a sliding system that sometimes favors capitalism more, and other times socialism more. We now appear to be sliding back more towards Socialism, due to the Capitalists borrow until there is no tomorrow of the last few years. Both systems have lived in the US since the country started. Some older folks I spoke with, that speak against Socialism, thought twice when I aske them if they were willing to give up their "Social" Security and put it into the stock market (as dumb Bush suggested). Referring to your examples, one can see how staunch supporters of either system neglect to note that one cannot exist without the other. If you have a business(Capitalist?) and you need workers (Socialists?) you then have a great example that the two do exist in reality. You cannot have a business without worker bees, and worker bees would fly around helpless if there were no jobs.
Keep them coming!!George