Thursday, June 4, 2009

Fascist Economy

Whenever anyone mentions fascism memories of World War II come into mind. They think Italy. They think Mussolini. They think dictator and tyrant. These thoughts point somewhere, but where exactly few people can discern. Fascism at its core is the co-dependence of government objectives with those of corporations. Like all other “isms”, with the exception of capitalism, this economic system is in search of the economic/political holy grail: the proverbial free lunch. Fascism is a top-down approach. It is “socialism with a capitalist veneer,” as Sheldon Richman explains. In a truly capitalist society, where voluntary exchange of goods, services, and ideas is respected, fascism would occur at the fringes of society. Unpopular agendas would not be rammed down by force or fear by the ruling class. In our times fascism is at the forefront of economic thinking and political landscape. Of course, it is wrapped in various veils (e.g. Keynesian economic philosophy); but the spirit is the same.

Consider last year’s bank bailout, or commonly known as TARP. At first, there was marked disagreement by the residents concerning the prudence of the plan. This apprehension was rightly placed. Fear was instilled in the people, rekindling long forgotten memories of the 1930s if this plan was not enacted. Yet despite obvious gaps the TARP plan successfully passed. Why was TARP inappropriate? Here are a couple of reasons:
1. Taking money from productive resources and transferring it to unproductive ones is wrong and immoral.
2. The stimulus plan has earmarks but politicians being experts in deception have called it by another name.
3. Politicians already have hooked the U.S. public with $9.7 trillion on bailout programs, yet still there are problems.
4. Anyone who believes deficits don’t matter is akin to someone believing in the tooth fairy. Total U.S. debt (public + private) is already close to 350% of GDP, the highest ever. Spending is not a way to prosperity, this is a Keynesian myth.
5. This is not counting unfounded liabilities (social security, medicaid, medicade) total about $45 trillion (conservative estimates).
6. Where is the stimulus money coming from? Debt. If there isn’t sufficient private demand for U.S. garbage (aka Treasurys), the Federal Reserve has hinted it will buy (by printing money out of thin air). This is ultimately price inflationary.
7. The primary beneficiaries of the stimulus plan will be those corporations connected to the politicians. This is why some CEOs crave for the plan.
8. If centralized economic planning works, the USSR would be the model to follow. I will let history speak for itself on this.

What is most nefarious aspect of fascism is that it is a road to decrease wealth creation; in other words, a path to poverty. How? Simple. The corporate aspect of fascism relies on what is call rent seeking behavior; that is, “[t]he expenditure of resources in order to bring about an uncompensated transfer of goods or services from another person or persons to one's self as the result of a “favorable” decision on some public policy.” Put another way, entities seek to increase productivity chiefly by legislation (i.e. changing laws) rather than by internal economies of scale. Companies and individuals in a fascist economy are more concern of cajoling local politicians to pass a law limiting external competition than seeking other meaningful ways to improve their product. This behavior multiplies with time. Product quality declines, ways of achieving higher productivity decreases, lobbying of government officials increases, and corruption becomes rampant.

Therefore, it is of no surprise when a Wall Street Journal article reports “how the group [made up of financial firms] spent millions of dollars lobbying members of Congress on the issue, followed by a hearing in which the lawmakers pressured the Financial Accounting Standards Board to amend the mark to market rules,” and how they are “taking steps to delay an accounting rule that would force banks and others to bring some of their off-balance-sheet vehicles back onto their books next year, which could force some to raise additional capital.”

In a truly free society none of these actions would be acceptable. But in our current world, it has become common wisdom. The ancient Biblical prophet Isaiah exclaimed accurately: “Woe unto them that call evil good, and good evil; that put darkness for light, and light for darkness.”

1 comment:

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thomasadair@hotmail.com