The bailout is not supposed to help you

by Roger Koppl

The Los Angeles Times reports that the “Federal bank bailout isn’t trickling down.”  No kidding.  I remember Dušan Mramar telling me years ago that the purpose of privatization in the old Soviet block was restribution, not economic efficiency.  We’re looking at something similar with the bailout.  The purpose of the bailout is redistribution, not economic recovery.  A Reuters report flagged by TheAustrianEconomists supports this view.  The report says what Bob Higgs and others have been arguing, namely, that credit is flowing abundantly contrary to what Paulson says.  The crisis is real enough if you’re a normal working person losing your house or your job.  If you are, however, the bailout is not meant to help you.

2 thoughts on “The bailout is not supposed to help you

  1. Dusan Mramar was 100% right, professor Koppl, even though Slovenia was among the countries who did better than others.

    When communism fell, the former communists turned into social-democrats, or even liberal or liberal-democrats or whatever label one can imagine, but they’ve became in effect the conservatives party – in the basic meaning of the term, that of aiming to preserve the status quo or of imposing a gradual, protraticve course on the process of social and political change. Their objective was to “manage” the transition, in such a way as to conserve their power and thus, effectively, they aimed to create capitalism through “reverse Marxism” – a gradual process of transferring the state/collective assets of the communist regime into their private hands. Because a too rapid pace of liberalisation or an unpredictable “social shock” could have give rise to a popular movement that might threaten their grip on power, they’ve pushed this process through in a gradual manner, always playing on populist rhetoric, nationalism or other ideological palliative that would give them legitimacy for manoeuvre (and political maneuvering was something that the communist elites in all of Eastern Europe, with their culture of conspiracy, bureaucratic control and impressive mastership of Machiavellian politics was something they were expert at). In many communist countries, there was no real and effective opposition to the former communists (the Czech Republic or Poland were partial exceptions here). Thus, the former communists operated politically through many parties, left or right, giving the appearence of democracy and pluralism, but they were all fundamentally connected through different formal and informal networks from the communist nomenclature and secret police. Any minor personality quarrels between “comarades” should not an cannot mask the efficiency with which they pursued their common – class? – goal – that of privatising the assets of the communist regimes and conserving their political power.

    What is actually curious is that they didn’t even make a secret out of this. Vladimir Pasti, to give just one name, a Romanian sociologist, produced a very clear Marxist analysis of the reverse process by which capitalism can and should rise from socialism.

    When I was in Slovenia, I had the opportunity to listen to Ljubo Sirc, a liberal, former dissident and political prisoner during Tito’s time, talking about this issue and he ended by asking : where is this going, what will it follow, are we now just replaying the sort of tactical opening pushed through in the 1920s by Lenin’s New Economic Policies ? It is not an unrealistic question to ask or one to discount easily because it underlies the lack of any clear, substantial and consistent direction towards which this part of the world – and I think the world in general – it’s heading. In the long run, aanything might go.

  2. Right, Bogdan. Indeed, it’s because of Dusan Mramor, Ivan Ribnikar, and others that Slovenia had such a good transition. Their understanding of social processes and their personal civic virtue allowed Slovenia to do better than other transition countries. Slovenian authorities listened carefully to Jeffrey Sachs, thanked him most sincerely, and politely sent him packing. They ignored Sachs’ advice and came out ahead.

    (BTW: My post contains a typo. It’s Mramor, not Mramar. I’ll have to edit that.)

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