Monday, September 15, 2008

The Failure of Privatization

The collapse of Fannie May and Freddie Mac, the American government mortgage lending institutions,is a clear admission of the failure of the neo-con agenda of privatization.

While right wing pundits like to refer to the government bail out of Fannie and Freddie as 'nationalization', this is a red herring. Fannie May was created by the FDR government because of the economic collapse of the great depression. It was always a state capitalist institution.

In the seventies the neo-con think tanks promoted 'competition' and the Nixon government created a state funded shareholder corporation to compete with Fannie called Freddie Mac.

Under Reagan the neo-cons were in full control and privatized Fannie May making it a shareholder based corporation, but still with state capitalist gurantees that the government would back their investments.

Last week the Bush administration admited that privatization had failed and bailed out Fannie and Freddie.

In a further irony state capitalist funds (called soverign investment funds) from China, India ,Singapore, and Dubai Inc. are being promoted as a way of bailing out the current failing private banks in the U.S.; Lehman Brothers and Merril Lynch.

The irony in this is that the greatest accumulation of wealth in the world currently is not on Wall Street, which is bleeding, but in China, where trillions of dollars remain in that countries Foriegn Investment Fund. As they do in the Middle East.

While the neo-cons denounced Keyensianism as a failure, the social contract that built modern post war capitalism in the West, lasted sixty years. The neo-con agenda of the Cato Institute and its like lasted a mere twenty years and led to two major Wall Street crashes, first in 1987 and now the down turn we have had for the past two years.

And of course those businesses that called for unregulated markets and getting government out of the way of business are now the same folks calling for regulation and lining up at the doors of the State with their hands out.


Black Gold

The Return Of Hawley—Smoot

Canadian Banks and The Great Depression

Bank Run

U.S. Economy Entering Twilight Zone

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1 comment:

Nick said...

In fairness to genuine Austrian influenced free market libertarians like Roderick Long, I must mention that they would correctly identify the source of this as state capitalism.

My reaction to the "nationalization" was: isn't it already de facto nationalized?!!?!