It is a commonplace these days to argue that the Bush administration helped to bring on the worst economic crisis since the Great Depression by clinging blindly to the dogma of the free, unregulated market as the solution to every problem. That is certainly an accurate accusation. At virtually every opportunity over its eight years, this administration has moved to loosen or eliminate government regulation in every sphere.
The result, as Barack Obama has said, was the absence of “adult supervision.” The excesses are now bringing the economy down around all of us. The roots of the debacle were recently and extensively chronicled in The New York Times by Jo Becker, Cheryl Gay Stolberg, and Stephen Labaton
And what rough beast, its hour come round at last,
Slouches towards Bethlehem to be born?
–William Butler Yeats, “The Second Coming
We are witnessing—living—the end of the cult of the free market. This very administration, bereft of any theory to guide it, has plunged headlong into a leading role for the state in protecting the corporate economy from collapse. Bush and company stared at the specter of a complete economic collapse, realized that only the state had the capacity to stop it, and moved to throw money into the widening maw of the crisis, but without a serious plan.
The death of the god of free markets follows that of Soviet central planning after 1990. When the Soviet Union imploded, western analysts usually saw the collapse as largely attributable to the failings of a state-controlled, centrally planned economy that was too rigid and unproductive to cope with the demands of being a Great Power, and the challenges of economic globalization.
The cult of central planning, as developed by the early revolutionaries in the Soviet Union, flatly rejected the market as a means of ordering the production and distribution of goods and services, substituting the rational deliberations of public servants for the egoistic competition of entrepreneurs. We now know that central planning, extended to every sphere of life, became like a dead hand strangling the spontaneity of human activity.
The death of each of these gods—central planning and the free market—was followed by gross excesses. In the former Soviet Union, we saw the emergence of gangster capitalism as the economy was swiftly privatized by allowing public firms to fall into the hands of former state officials who thereby became instant millionaires. The Russians are still paying for those mistakes.
The Bush response to the crisis of the free market has been similarly ill-considered, and promises to have similarly dire consequences. By focusing the bailout on companies that are “too big to fail,” we risk simply compounding the concentration of wealth and power in contemporary American society. Now, the surviving big corporations will be directly sponsored by the state. That amounts to the economic facet of fascism (to go along with the political manifestations that have become so familiar in the course of Bush’s “War on Terror”).
Neither the post-Soviet Russians nor the post-market Bushies had a theory that made any sense. Meanwhile, overshadowed by this war of the gods, a very sensible, pragmatic, theoretically well-grounded alternative has survived: social democracy, or as it might well be termed, managed capitalism.
Social democracy as practiced in Scandinavia, the Netherlands, and in attenuated form elsewhere in Europe, leaves the means of production largely in private, capitalist hands, but regulates the economy to serve the public interest by maintaining a high standard of living, using state expenditure to soften the impact of recessions and to provide directly such essential services as health care, regulating corporate conduct to limit market excesses, and thereby assuring private companies of enough profits to stay in business.
We may hope that Barack Obama will move us toward social democracy. If not, we are on the brink of fascism.
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