We trace our initial political and economic understanding of this new socialism directly to a key insight of John Lanchester, who we refer to in a previous LawPundit posting at Laughing All the Way to the Bank - Dwight Garner reviews I.O.U.: Why Everyone Owes Everyone and No One Can Pay - by John Lanchester. Garner benignly identifies Lanchester's brilliant recognition of the NEW SOCIALISM as "black satire" when he writes as follows:
"“I.O.U.” crosses over into black satire when Mr. Lanchester describes how bankers used their new tools to make money from poor people, the worst credit risks, by prying their cash loose through predatory lending, then pooling this money and selling it off. Who cared if these people defaulted on their mortgages? The risk had already been passed along to others, and ultimately, when banks failed, to taxpayers. Mr. Lanchester calls this “a 100 percent pure form of socialism for the rich.”"That's quite right - but it is NOT really satire at its core. It is reality.
The rich continue to get richer and the poor continue to get poorer. How is that achieved?
Our first example of the NEW SOCIALISM is the bank impact - one year later - of last year's "bailout" of US financial institutions by the government, speak by the taxpayers. The Wall Street Journal at WSJ.com in Geithner Gets Some Credit—But Still No Cheers writes:
"The most biting critique isn't that the Obama-Geithner plan failed to stabilize the banks; rather, it's that it was too generous and worked so well that surviving banks are hampering the rewrite of finance rules needed to prevent a repeat. "Reform was put off until after the most powerful banks had grown even bigger, returned to profitability, and regained their political clout," economist Simon Johnson of the Massachusetts Institute of Technology writes in a forthcoming book."The surviving "bailed out" banks are flourishing again splendidly as winners of the bailout lottery - at the expense of the taxpayers and the little guys who essentially fund the banks' risks. That is all completely contrary to the economic and philosophical concepts of true capitalism, where the classic justification for permitting capitalists or entrepreneurs to take unconscionable profits is - by capitalist thinking - to greatly reward the capitalists' (alleged) economic risk-taking. But in fact, a smart capitalist today bears virtually NO RISK at all in financial dealings, preferring to speculate, as it were, with other people's money, i.e. the risk is "socialized" in a variety ways to the poorer "mass" of society, who bear the ultimate consequences as increasingly overburdened taxpayers, foreclosed mortgagees, unemployed persons, etc. The NEW SOCIALISM.
What is true at the level of the banks is equally true at the level of nation-states, where weaker countries are permitted to pile up exorbitant amounts of credit -- often to buy the goods and services offered by the countries who are providing that credit. Countries such as Latvia or Greece have put themselves into dire financial straits because WESTERN banks have extended too much credit to people and institutions in those countries, credit which was often used to buy things that the borrowers did not really need, such as armies of gas-guzzling motor vehicles.
As a good example, instead of the provision of sensible and futuristically viable public or private transportation in Riga and the Baltic States generally, everyone now has obtained a car for the now hopelessly clogged streets of the few large cities - all on credit of course, in countries which have not yet been retooled industrially or agriculturally to cope with the demands of world markets. How, except for selling off their lands and depleting their forests - the only natural economic resources that a country like e.g Latvia has - can such countries hope to pay off their debts? Where is the repayment money to come from?
That is the diabolical beauty of credit extended to developing nations who have no chance to repay the large sums of credit extended to them - the debt is then in fact used by the lender nations to gain other advantages. A country which can not be bought directly is bought indirectly. A few profit and the mass of citizens pays through the loss of their nation's natural resources.
Greece has put itself into such a difficult situation that we read headlines such as this one at the New York Times:
Niall Ferguson: The Next Greece? It's The US!
Is it time to learn to speak Chinese?