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Sunday, February 27, 2011

The capitalist call for communism

An overheated market let to a global financial melt-down, affectionately known as the GFC (Global Financial Crisis).   As the market crashed the major US banks turned to the government to rescue them.  The US government provided the largest "bail-out" in history because of the fear that the banks were "too big to fail". However, this resulted in the US government becoming the largest share-holder for many of the banks and of the US banking industry being nationalised.   This was described in an article by the New York Times published on 16 January 2009:

As stated in the NY Times article, the $700 billion bail-out called for the government to take control of the banks' investments, executive wages and share-holder dividends. Since that article was written, it has been revealed that the Federal Reserve bail-out was worth $9 trillion:

Of course a country such as the United States, which has so vociferously opposed communism would never allow the nationalisation of free market institutions such as banks... would they?

The lesson from the GFC is that unrestrained capitalism will result in disaster.   Globalised companies are only interested in profit, they are not interested in the service or product that they are supposed to deliver.  When globalised companies crash, they do so with global consequences. 

Yet, capitalists are constantly campaigning for the privatisation of traditional government services.  The GFC and the general increase in costs and decrease in services from profit driven companies show that there is a need for government control of essential services such as health, education, police, defence and public housing  Governments are less concerned with profit and are committed to delivering the service for the good of society.

Obviously there is a place for capitalism, but it must be tempered by responsible government controls in order to protect society in general.

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