The last six months have seen an increasingly impossible contortionist act as various financial institutions (and many other businesses) are placed under ever more government oversight, funding, and sometimes control. The trick has been to maintain a free market ideology while acting in ways that are opposed to that ideology. In the past week, there seems to be serious discussion of outright nationalization of two of our largest banks, Citigroup and Bank of America. Even Alan Greenspan has conceded, “I understand that once in a hundred years this is what you do.”
Our current Fed chair, Ben Bernanke, has more or less conceded this point. The stock market is not pleased.
That is sort of like George Steinbrenner pulling for the Red Sox to win the World Series. Fundamental heresy coming from the very top at this key point in history shows that there is not only a financial and economic crisis, but an ideological one as well. Global capitalism has triggered a growing list of regional financial crises over the last two decades (East Asia, Russia, Mexico, Argentina) and now it seems that the problem has spread to everywhere at once.
Keep in mind that a theory (whether economic or otherwise) must always work. If a single incident can’t be addressed, the whole theory must be adjusted. Maybe even thrown out. So if one of the world’s smartest free-market economists is admitting that the system can no longer function without government control, there is a need to look at some fundamental questions.
At the same time, even the most ardent communist must by now admit that that system has some serious flaws, in that it squelches the entrepreneurial spirit that is essential to keeping things moving forward. The past century has seen a back and forth struggle between these two ideologies, and whenever one gets the upper hand for more than a decade, its flaws become apparent. Given another decade or two, it fails to the point that the pendulum swings back the other way and you have Alan Greenspan calling for bank nationalization.
We need to get out of this vicious seesaw, and find a middle ground that blends the liberty of capitalism with the justice of socialism. Neither of these forms have successfully delivered their own goods, let alone found a sustainable balance. If capitalism doesn’t give us freedom, and socialism doesn’t give us justice, why do we keep turning to them?
There are models for how to find the middle ground. We should be looking to Mondragon, Trentino, Quebec, Emilia-Romagna, Arctic Canada, the Co-operative Group (UK), and many other examples. They have also not achieved perfection, but they seem to provide an alternative to the twin ideologies that have failed us again and again.