In the wake of the financial crisis of 2008, where the default of subprime mortgages (a small percentage of the overall mortgage market) in the United States caused worldwide economic turmoil, we were told that we needed to “bailout” the biggest and the best of the banks which were in the worst of trouble. The American taxpayers and their children, perhaps generations of grandchildren, would pay out over $700 billion plus interest to return stability and confidence to the banks and get them to resume loaning money to those same taxpayers (who would also have to pay interest on those loans funded by the money on which they were already paying interest). It didn’t work.
The problem continued and the next White House administration decided more of the same was needed. Another $800 billion went to banks (and to support specific industries). This would again be paid by taxpayers for generations. Meanwhile, across the pond, not only were European banks in trouble, so were many of their national governments. Seeing how well the first bailout had worked in the United States, they naturally started the same process over there. It worked just as well. Oh, and the second bailout here at home didn’t work any better than the first. Something else was needed.
The best and brightest economic minds of the Federal Reserve Bank, those brilliant leaders of the world’s biggest banks, decided that what was needed was even more of the same, but with a new twist. This time there would be an ongoing bailout “until the crisis is over.” The “Fed” committed to continuing purchases of “troubled assets” from the banks for as long as it takes. Keep in mind that while the Fed has strong ties with the U.S. government, it is an independent and private banking group. The theory behind its operation is that, obviously, the leaders of the biggest banks in the world must know how best to manage both currencies and economies.
You may have noticed that not much has been mentioned about what was done to help the average citizen. Well, that’s because not much has been done. Yes, there were incentives for refinancing troubled loans, offers of trade-in credits for those who wanted to buy new cars and trade in their “clunkers,” the government even (eventually) went after those bailed out banks that were foreclosing on people who were not delinquent on their mortgage payments. However, all of the “help” offered to the people was grounded in goading or forcing them to go further into debt. Between the Republicans and the Democrats, the government paid over one trillion dollars to cover the bad debts of the banks, but didn’t help to cover the debts of, or offer any direct relief to, its subjects.
Some will object to my saying that the government covered the bad debts of the banks. They will be quick to point out that the government forced the banks to make bad loans to people who shouldn’t have qualified for them. Those are not the debts I am discussing. The bad debts of the banks, the debts which caused the worldwide financial crisis, were in the essentially unregulated derivatives market in which the banks sold those bad mortgages to other investors, and the credit default swaps which the banks devised and for which they were responsible.
The latest development just occurred in Cyprus. After closing the banks for more than a week while it scrambled to figure out how to obtain a bailout for its banks, the government of Cyprus has made some very dramatic moves. One of its two largest banks is being eliminated, with its “good” accounts going to the remaining bank, and its “bad” accounts going to a newly created bank which is merely a holding ground for their complete elimination at the hands of the government. They are also imposing strict restrictions on how its subjects may access their money and how much they may access. Holders of accounts with more than 100,000 euro were forced to buy shares in the remaining banks with their “excess” money.
Some American “conservatives” have been quick to declare these acts as socialist or communist. They try to claim that this is the end of private property, but that claim doesn’t really withstand scrutiny. After all, it’s not like the American founders they revere were above property seizure, and they don’t claim that those seizures eliminated private property 200 years ago. In reality, this is nothing more than a special tax levy, and no matter how much we don’t like taxes, they do not–in themselves–mean the elimination of private property.
The question remains of just how to describe this new economic era in which we find ourselves. Socialism and Communism eliminate private property altogether; everything belongs to the state. Keynesian Capitalism takes from the rich and redistributes to the poor through government programs, but does so in order to keep the “engine of Capitalism” working. “Pure,” unregulated Capitalism lets everyone fend for themselves. Exactly what do we call it when the government takes from the rich and middle class to support the richest corporations? It has certain similarities with some forms of Corporatism, and it may be that we are heading in that direction.
One thing is certain, there is fear about the economy everywhere we look. Despite the assurances of government leaders around the world that everything is getting better, the signs show otherwise and we are starting to hear more warnings instead of assurances. Unfortunately, our political leaders haven’t figured out just what kind of government managed assistance program can spend our way out of this growing economic mess. Tragically, they cannot see any alternative to what they’ve already tried. Our economic leaders are not offering anything better than “let us take care of it without interference–we know best.”
In the United States, the “conservative” and “libertarian” political movements see this as their moment. To them, this is the proof they need that government should stop messing with the economy and let the “natural” laws of economics sort things out. One only needs to look at the working conditions of the almost completely unregulated businesses of the late 19th and early 20th centuries to see what the result would be. The most developed countries in the world had a poverty class to rival that of the poorest countries.
Distributists should see this as our moment. Rather than unleashing the dogs to the “dog eat dog” world of Economic Liberalism advocated by the conservative and libertarian movements, and rather than implementing even more of the same policies that have failed so completely, distributists should discuss unleashing the power of the sustainable local economy as the basis of a stable national economy. How can we do this? Start talking to people. Share articles discussing Distributism with people. Do whatever you can to open the minds of people you know to the fact that there is another way besides the solutions being offered by the various economic “experts” of the political Left and Right. It is only by sharing our ideas that they will get considered. It is only by getting our ideas considered that there is any chance that they will be tried.