Economic Matters: Socializing the Risk or Capitalizing the Reward?
Written by geoff holsclaw : September 25, 2008
I for one support the goals and views of Jesus Manifesto wholeheartedly. But I tend to read these goals through economics (rather than through the issues of pacifism or none voting which deal with war and democracy directly). I guess in one sense I have made a (but not THE) post-political turn such that everything truly political happens in the realm of the economic. Perhaps many will think this is a tired Marxist refrain, but I just mean that the most important issues politically are controlled economically.
But let’s turn to the issues at hand: the proposed economic bailout for the economy (see here for update and here for history).
First off, here is a draft of a letter that I sent to my Illinois Senators and Congressman (Obama, Durbin, and Kirk…(If you would also Iike to write a letter to you Senators, go to this SoJo campaign). I offer it as both an example that while I criticize voting and federal politics, I also advocate a strong ecclesial existence, this does not mean that I merely abstain from political action. But also it is an example of political economy.
As a person of faith and pastor of a local Christian church, I ask that you would act quickly in opposition to the administration’s proposed bailout plan, and instead support a more responsible and regulated plan (such as that advanced by Senator Sanders).
We cannot socialize the risk and capitalize the reward of these financial institutions, allowing average taxpayers to carry the burden of the bailout without them also reaping the benefits when the crisis has been averted.
By any account, the financial events of the last week have been historic and will continue to be, rivaling that of the Great Depression, and perhaps even your own historic bid for the White House. And while haste is necessary to stave off a financial meltdown, this cannot come at the cost of expanded Administrative power.
That phrase “socialize the risk and capitalize the reward” I got from Steve Long, my professor and adviser at Marquette University. This in effect is what the Bush administration is proposing when it seek a $700 billion bailout check given to the Treasury. This would be an open line of credit that the Treasury would use to bolster these ailing financial institutions, because if they should fail then the lines of credit which keep the economy greased would dry up. Credit is like the oil in your car. If it runs out then the engine explodes. Therefore, for the administration, we need to socialize the risk through a taxpayer bailout because the risk of the whole engine blowing up is too great. But once the risk is avoided, then these institutions should be able to go on as before, i.e. capitalize the reward.
Now, Obama and McCain both feel this is irresponsible (good thing). The right thing to do in this instance would be to socialize the risk and socialize the reward by allowing taxpayers to benefit when these stocks rebound (as they did in Sweden) by have the government take over a controlling share in these firms as part of the bailout. But the problem for Republicans is that this sound too much like a State owned institution. And it sounds like this because it is this. But Bush cannot allow this because this would invalidate his Free Market stance. He want his Capitalist cake cut up by a Socialist knife. Of course the really scary thing is that Bush’s proposal, in the form of $700 billion, would express the largest shift of power from the legislative to the administrative branch ever. Why? Because running the economy in the most politically powerful thing one could, even more powerful, I would argue, than making war on another nation (which Bush has also done). For this reason, Senators are rightfully skeptical about Bush’s proposal when it sounds like it is from the same playbook titled “Weapons of Mass Destruction.” This is again I’m post-political in this matter because the economy runs politics (although, as noted, that didn’t stop me from writing my Senators).
Now the another options would be to capitalize the risk and capitalize the reward, but that is what got us in this position in the first place, and no one is willing to bite the bullet and just let the economy, and the American Dream, and the American standard of living diminish (don’t get me started on how this is based on Nationalism and how guarding our markets is the exact opposite of what the Neo-Cons were allowing other nations to do, and how all this led to the insurrection in Iraq).
Now this seems to exhaust the options for the government. And why I advocate, at the federal level, that if something is going to be done then it should be to socialize the risk and socialize the reward. (Of course, in secretly hope that nothing gets done and the Capitalist world crashed around us. But then again, that would probably be worse then I realize, and by the grace of God I’m not punished for my sinner, so I need to not hope for the swift punishment of all those who spend beyond their means).
But there is a fourth option, but it cannot be run through the government, and can scarcely be implemented in the market. But his would be to capitalize the risk and socialize the reward. I suppose this would be socially sustainable market relations which do not seek profits over every other benefit. Maybe I’m wrong, but is this biblical? That each would gather, but no one would gather too much or too little (Exodus 16:17-19).
More could be said, but I’ve gone on long enough. All that to say, the event of last week have revealed the true motivations of this administrations (as well as its faith in the Market before all else), as well as revealed that the essential orientation of politics is to ensure a smoothly running economy (rather than things like justice, goodness, peace, or even the commonwealth).Geoff Holsclaw is co-pastor at life on the vine in chicago and a ph.d student at Marquette University studying liturgy and politics.
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