Greenspun's socialism

Brian Greenspun's Sunday opinion column in the Las Vegas Sun illustrated good intentions, but ultimately dangerous and misguided thinking.  In calling for government to take the reins of Wall-Street investing – supposedly in the interest of the taxpayer – Greenspun calls for a new kind of socialism for America's future economy.

Socialism, which has historically meant government control and ownership of the means of production (whereas capitalism is the private ownership of the means of production) has a dismal history, which Greenspun admits.

Greenspun's "new socialism" would have government take control of the means of capital, i.e. banking and investment.

If you thought corruption and cronyism are already rampant in America today, wait until you grant banking, lending and investment powers to the federal government and its bureaucrats.

An American economic system that follows the direct whims and investment preferences of government officials will only encourage more corruption as the elites in America seek political influence to benefit their enterprises at the expense of everyone else.

Such a solution would take the mighty American economy and turn it into Mexico, where government-run companies and massive monopolistic private companies rule the economy. Small businesses are regulated through harassment from government officials. Any small company that manages to survive and grow is squashed or nationalized at the request of entrenched elites by a government that protects its favored industries.

If government were left in charge of investment, the government would pick the winners and work very hard to crush the competition.  Innovation, efficiency and productivity in America would suffer immensely.

Greenspun's ideas rest on several fallacies.  He assumes that the government can spend taxpayer money better than people can spend their own money, and he assumes that we have had unregulated free-market capitalism all this time.  In reality, we have not.  He also assumes that government officials are somehow immune from greed and will always make decisions based on the interests of the people.

Arguing that capitalism has failed, he writes, "Had we let capitalism rule the day, the auto industry would be gone..." Thank goodness for past government bailouts and investments, he thinks. Not so fast, Mr. Greenspun.

Not only has the U.S. government had a history of bailing out American auto manufacturers, it protects them through regulatory barriers, quotas on foreign cars and taxes on imports. The effect has been to protect American cars from competition by artificially raising the price of foreign cars.

Many years ago, the Japanese sent small, fuel-efficient cars to U.S. soil at a time of rising fuel costs. American car companies, unable to compete for the moment, begged for protection. The U.S. government slapped quotas on the manufacturing of compact cars from Japan. The rising demand for Japanese cars and a lower supply meant higher prices and more profits for Japanese companies.

The Japanese responded by adding luxury cars to their market – say hello to Acura and Lexus. American companies again responded by requesting protection. Quotas on Japanese luxury cars were made and again the Japanese acquired greater profits. They soon returned to the American market with trucks and SUVs. Not surprisingly, the Big Three returned, asking for more help.

The result, as free-market economists predicted, was to weaken the U.S. automotive industry. Without real competition, GM, Ford and Chrysler had little incentive to innovate and stay at the top of their games as protection retarded the need to innovate. Any time the American market soured, they could simply return to the government and ask for more protection.

The ultimate result of economic protection was to force Americans to choose between overpriced foreign cars and shoddy American cars.

Continuing his assault on capitalism, Greenspun writes:

In this global economy, most of our major competitors are sponsored, funded or otherwise encouraged by the governments in which these competitors reside. Cheaper money, more workable regulations and the political and moral suasion of the good offices of governments is a difficult combination for purely private American business interests to overcome.

Our global competitors are protecting their markets, instituting beggar-thy-neighbor regulations advantaging domestic companies and debasing their currencies.  Greenspun wants us to do the same.

Mr. Greenspun, we have been doing this, too – and we've been doing it at our own peril.  The very solutions you offer to these imaginary capitalist problems are what caused the problems to begin with.

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