Thursday, November 13, 2008

123. Bailout argues against capitalism

In Planned Parenthood of Southern Pennsylvania v. Casey (1992), the court wrote of imposed substantial limitations on legislation limiting economic autonomy in favor of health and welfare regulation in Lochner v. New York. It notes that these limitations were overruled in West Coast Hotel Co. v. Parrisk, but that, "In the meantime, the Depression had come and with it, the lesson that seemed unmistakable to most people by 1937, that the interpretation of contractual freedom protected rested on fundamentally false factual assumptions about the capacity of a relatively unregulated market to satisfy minimum levels of human welfare.

The bailout, which reared its ugly head right smack in the middle of the presidential election, left a lot of blame on the table. Just who was responsible, and why should taxpayers foot the bill? Was this the result of deregulation, greed, and reckless risk-taking? Or, does the blame flow further down the food chain- such as unemployment and irresponsible home buying? Furthermore, with huge budget deficits and a war costing 10 billion per month, where is this money coming from?

Is this a case of socialism, that oh so dirty word, bailing out capitalism? If the lending institutions do not get the bailout, what impact would that have had on the credit markets- and the ability of Americans to get loans to buy houses and cars? And, if Americans cannot get loans, what impact does this have on the already hurting housing market and the struggling auto industry?

It is easy to see the spiral...for if industry struggles, then more people lose their jobs and more loans go unpaid, and more homes are foreclosed on. Where does it end, if not in another depression?

Consumer advocate, Ralph Nader firmly believes that this is the case of socialism rescuing capitalism. "The bailout was so frantic, so ultimatum-laced, so open-ended, so absent of criteria or standards . . . that it was clearly socialism bailing out capitalism," said Nader. I have written for a few years now that capitalism, as much as we wish it were not true, needs to be regulated. Free markets, in their purity, make absolute economic sense. However, in reality, in a world of lobbyists, corrupt CEOs, unethical corporations and the demise of labor unions, there needs to be some sort of government regulation. It is deeply unfortunate, but greed pressures the economic markets to the point of, as we have seen here, near collapse.

It is not just the financial markets, it is, as I have also argued for the last few years, the corporate incentive to placate shareholders at any cost- which is often American jobs. It is impossible to continue to send good jobs overseas, to save labor costs and avoid environmental regulations, and not believe that it will not have an effect of Americans' ability to pay back loans and make their mortgage payments. Capitalistic economic systems fail when corporations, through political relationships, are afforded legislative loopholes to exploit a global market- yet are subsequently rescued when they fail. Nader also views the bailout as the "collapse of corporate capitalist ideology" and that he emphasizes, "'corporate' because the only capitalism left now is small business. They are the only ones free to go bankrupt."

Adamant capitalist and famous American economist Milton Freedman aptly suggests, "What kind of society isn't structured on greed? The problem of social organization is how to set up an arrangement under which greed will do the least harm; capitalism is that kind of a system." Although capitalists will always find an argument, as the Supreme Court justices recall it, the Depression hurt lots of people, lots of innocent people- because of the lack of legislative regulation. And today, Americans are hurting. We are reaching unemployment highs, millions of people have lost their homes, those that are employed are often underemployed or taking pay cuts, and prices just keep going up. The American people need a bailout, and, and they need their politicians to understand the issues- and history.

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