The S Word

Dare we say...socialism ?!

I've become a capitalist with the heart of a socialist (or is it the other way around?? ).  After two years of hardcore indoctrination at the Harvard Business School, a professional life in business, and 8 years of W's 'two nations, under capitalism, with deregulation and tax cuts for some', I'm ready to throw in the towel and line up with other Social Democrats around town behind the conclusion that unfettered capitalism is broke and needs fixin'.

Public ownership of the means of production seems to offer some solutions here.  In fact, the horse is already out of that barn, since current Treasury plans have migrated to the sensible solution of capital investment in failing banks in exchange for equity stakes that we hope will be sold at a profit to the Treasury accounts later on.  

So, we're nationalizing the banks and AIG. How do we proceed with the auto companies? Throwing $25 billion of good money after bad (the Peloser plan)  is a non-starter.  It's like putting a bottle of Jack Daniels in front of the alcoholic with the admonition---go ahead!  drink it, but this is the VERY last time, we MEAN it!  Yep, it's time to pay the piper for 35 years of arrogance and bad decision making in Detroit (since the first oil crisis in 1973).  The government should take over these businesses immediately and provide enough cash flow to maintain operations until the business units can be liquidated or sold off to the Japanese and German manufacturers who have been eating our lunch for decades.  We can't afford the psychological blow of a GM insolvency, so the Treasury needs to assume the role of the hard nosed venture capitalist who will invest, contingent on replacing senior management and the board and squeezing current equity holders.

Here's something else the government should be doing to get consumer spending moving in the right direction: provide a $1,000 subsidy to every household in America that wishes to purchase a new vehicle over the next 24 months, provided that these cars are manufactured by US companies and achieve efficiencies of at least 30-35 MPG.  I haven't calculated whether the industry has sufficient capacity to fulfill orders if, say, 30-40% of US households take advantage of the program.  But the cost to the government---$30-40 billion--would be a subsidy that immediately translates to consumer purchases, a key ingredient we need to get the economy moving again.  

Maybe this is a half baked idea.  OK.  But here's the bigger issue---we need to confront the risks to the US and global economies from financial and manufacturing companies whose tentacles are so far reaching that they cannot be allowed to fail.  We need a national planning authority that identifies those companies and creates safeguards and oversights (including strict rules on exec comp and board seats for senior business leaders acting on behalf of the public interest)  to minimize the impact of failure on the broader economy.  

It's socialism, ladies and gentlemen, but on a limited scale and targeted to the 50-100 corporations whose breadth of impact on us all require a unique form of corporate governance and oversight.