Saturday, February 14, 2009

Michael Munk on "We Are All Socialists Now"

The shorter take - "hardly." The more complete take:

Why do the media keep saying the banking system isn't working "normally?"

It is and the banks are.

In a capitalist system, banks function to make money for their owners, not to provide capital for economic growth and jobs. When they think a loan applicant isn't likely to pay it back, they don't make the loan.

In a recession, the "credit worthy" applicant pool shrinks at the same time bank assets decline with over-valued "funny money" speculation. And they have to foreclose on less valuable security put up by previously "credit worthy" but now defaulting customers.

This is as it should be in a capitalist system: earn money when your risk pays off; eat it when it doesn't.

Of course, in the actual political economy of capitalism, the suffering of the victims of what capitalist economists call the "business cycle," can persuade politicians to blame banks and speculators that in good times they celebrate for their role in producing "prosperity" through a "free market."

And that's what TARP I and II are all about.

We socialists (who only wish Newsweek was right) should be telling anyone who will listen that capitalist institutions have functioned as they are expected to. That means the system has failed the people and ought to be replaced. If taxpayers eventually bail it out again this time, its fundamental tendency toward stagnation and crisis will face us in the future.

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