Socialism

Thousands marched in DC this weekend to protest the Obama Administration's supposed "socialist" policies. Let's review the record.

It was the free market, laissez-faire policies of the Reagan, Bush, Clinton and Bush administrations that created a bloated, hyper-aggressive, wildly unstable financial system. Private mortgage lenders and investment banks (not, as is sometimes argued, Fannie Mae, Freddie Mac, and the Community Reinvestment Act) were responsible for the push to expand subprime lending. It is our predominantly private-run health care system that has created escalating costs and left 50 million people uninsured. Not to mention the energy market, where reliance on the free market has left us dependent on oil imports from the most unstable regions of the world and perched on the precipice of environmental catastrophe. We have experienced market failure on a grand scale.

Given the mess to be cleaned up, what is remarkable about the Obama Administration's policies is how minimalist they have been. The banks were not nationalized, though many economists from the right and the left recommended doing so. The nationalization of Fannie Mae and Freddie Mac merely formalizes what had previously been an informal relationship between these agencies and the government. The government will not "take over" the health care industry - the public plan, if it comes to pass, will be available only to people without employer-provided health insurance and is expected to enroll only about 5 percent of Americans. Though the government now owns stock in GM and Chrysler (had it not done so, those companies would no longer exist and the economy would be in much worse shape than it is now), it has committed not to using that power to direct the day-to-day affairs of the companies. The managed bankruptcy proceedings were a model of efficient government action. And in dealing with the global warming problem the Administration has not mandated that we all put solar panels on our houses; it has proposed creating a vast financial market in which permits to emit greenhouse gases will be traded.

The Federal Reserve has been much more aggressive in "socializing" finance - according to this article, the Fed has been buying up virtually every new mortgage-backed security issued by Fannie Mae and Freddie Mac. It has been purchasing commercial paper, propping up mutual funds, and taking other extraordinary actions. But these are surely temporary - as the economy recovers we can expect to see a fairly rapid pull-back in all of these areas.

Thinking people on the right have reacted to the economic meltdown by revising their views of the ability of markets to stabilize themselves. What government interventions, they ask, are most likely to improve the functioning of markets in financial services, health care, and so on? The marchers in Washington and their organizers have somehow managed to emerge from the markets' mayhem with their ideological worldview completely unaltered. Their ire is focused on the people who have taken it upon themselves to clean up the mess rather than on the people who created the mess in the first place. But at the end of the day, isn't the opposition going to have to say what they are for rather than just what they are against? And what will they have to say?