On October 13th 2008 Steve Lohr of The New York Times wrote an article about the United States taking steps toward nationalization all of America’s banks. Lohr states how over the years America has nationalized railroads, coal mines, and steel mills. Finance experts believe that the government stepping in and taking stakes in the U.S. banks would be a forward step in elevating our current economic emergency. Lohr points out that this isn’t the first time that the government has nationalized companies and relates back to the war days when during World War II the government seized railroads and coal mines for a short period to make sure the U.S. got the necessities needed for the Korean war. Afterwards the government turned them over to private owners. After World War II many European countries nationalized basic industries such as coal, steel, and some auto companies, which remained under the control of the government until the 1980s. Even today Europe is better off with the government playing a role in business. The United States plan to nationalize all banks would be the next step to end the credit crisis.
Although it could be good to have the government interfere and take control all of America’s banks it would definitely be against but also coincides with the views of Milton Friedman. Friedman believes that the government should be an “umpire” and only over see our economy. Also, Friedman is all for privatization of companies, by the government taking over the banks it would get rid of any privatization. But, Friedman’s one point is that the government should only decide on matters that affect our whole nation. Having the government take control of all our banks goes against Friedman but, also is in favor our Friedman since he believes the government should only handle matters that affect our whole country.
Later in the article Lohr mentions the government seizing coalmines and steel companies during World War II. This totally goes against Friedman since he believes in privatization and that the government should minister few things as possible. The reason the government nationalized 88 companies was because the companies were prepared to start a nation wide strike. The Supreme Court over ruled this abuse of presidential power. This gave complete control to these companies and forced the government to comply with them. Giving a win to Friedman’s beliefs.
The debate over nationalized banks in America has its roots in the times of the revolution. Like Friedman says, the government should only be in control of things such as the military because it would be hard to let the private sector maintain it well. But, even though one does not have to be involved with banks it is hard to avoid. Everyone is affected by the banking system whether they like it or not. One needs a credit score to get loans, and most jobs are related to it as well. When it goes down so does everyone else because they are at the very least indirectly connected with it. When banks engage in risky behavior their clients or business partners aren't the only ones affected. This being said, one cannot opt out of this system just as one cannot opt out of national defense.
ReplyDeleteGovernment already has a lot of influence over the banks. In the 90's the government forced certain banks to allocate a certain percentage of their loans to subprime loans. Which had a lot to do with the subprime meltdown and the eventually need for the banks to be bailed out.
ReplyDeleteI know Friedman would argue to keep the banks private and the article that you did your post on thinks that America wants to move toward publically owned banks. I would make the argument that today banks are not fully private like Friedman would have liked. I think the issue is that banks either need to be completely private or owned by America. The banks cannot be privately owned but constantly being pressured and influenced by the government.
Another topic about the "socialization" of America!
ReplyDeleteI would definitely agree that Friedman would have a fundamental quarrel with the nationalization of banks, if not for the sole reason that it would reach into the public sector for support of our finances. But personally, I definitely have mixed feelings.
Publicization of our government's resources sounds like a great idea on paper, but I wish that it would be as great in reality. Making our government have control of something like our banks makes me a bit nervous...we all have bad experiences with the DMV, what if going to the bank was as much of a pain in the ass?
I hope that if our banks do really become publicized, we do not see too many results. The competitive bank market right now makes many banks have truly tantalizing benefits for members and I do not want to lose that!