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business newsQuick Hits: America's Planned Economy
Centralized control smacks of socialism
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Treasury Secretary Hank Paulson laid out a proposal yesterday to overhaul the regulatory landscape of America's financial system. Allegedly, the plan's been in the works since before the credit crunch began last summer, but the urgency of the problem forced its early release. The plan calls for increased power for the Federal Reserve to manipulate the financial markets under the guise of stabilization, which is hardly consistent with capitalist ideals. No, nationalization and expensive bailouts represent the opposite end of the spectrum: Socialism.
Socialism is a vague concept. It's loosely defined as the distribution of property and wealth by government, which has a limiting effect on opportunity. The manifestation of a socialist system will differ by epoch and country. Modern-day Scandinavian countries enjoy stellar public services in return for exorbitant tax rates. Post-revolution Russians navigated frigid winters with damp firewood and black market bread.
Few would argue changes aren't warranted for regulatory bodies that came out in defense of Bear Stearns (BSC) only days before it collapsed and allowed Citigroup (C) and Merrill Lynch (MER) to employ the same crooked accounting that sunk Enron.
But the broad powers proposed for the Federal Reserve smack of economic planning of the worst kind. U.S. financial markets aren't meant to be micromanaged by fear and the whims of academics and bureaucrats. Markets ebb and flow. How can the tide come in if it's not permitted to go out?
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