'Greed is not good, but wealth is...'

[Naveed Yaseen]

SARFARAZ AHMED
ARTICLE (October 04 2008): As the financial crisis has worsened the real economy or the manufacturing sector has also nose-dived. While forecasting a slowdown in the Western economies, a latest study by International Monetary Fund has forecast that the US could be heading for a "significant" recession.

"As an economic system, capitalism has defeated communism. But the philosophical appeal of communism is still powerful enough to defeat capitalism."-Richard Nixon

France, the second largest economy of eurozone, is said to have slipped into recession. A leading article titled "A default by the US government is no longer unthinkable" in Daily Telegraph has even claimed that "power has tangibly shifted - away from the United States and the Western world generally, and towards the fast-growing giants of the East ..."

In his highly acclaimed In The Arena, former US President Richard Nixon had some interesting stories to tell. One such story is about corporate wealth. According to him, as long as politicians and editorial writers resort to politically popular attacks on wealthy interests, the US runs the risks that "corporations will some day find themselves overtaxed, over-regulated, and eventually even swallowed up by the state". Nixon, who was considered an ultra conservative Republican, had recalled that in the 1960s, it became fashionable among young people to deride wealth as an evil in itself. In the 1980s, there had been a tendency to swing to the other extreme, with "Go for it" becoming the slogan that inspired the young people. According to him, "while I have never had the urge to accumulate wealth, I have great respect for those who do."

Look at today's America. Financial institutions are being swallowed up by the state one after another in the name of bailout or government rescue plan much before these could have been overtaxed or over-regulated by the state. The government is spending billions of dollars to buy bad mortgage-related securities and other devalued assets from troubled financial institutions with a view to preventing a serious recession. These troubled institutions arguably do not owe their woeful fate to stinging attack on their interests by politicians and editorial writers as their plight seems to emanate chiefly from reasons that were enunciated and propounded so well by Karl Marx in the 19th century.

The present US financial turmoil, which is equated by leading American investor, businessman and philanthropist Warren Buffet as attack on Pearl Harbour, has provided the fiercest critics of US with a golden opportunity to launch fresh attacks on it and its system. According to Venezuela's Hugo Chavez, it is the capitalist system that has caused the financial crisis in the US and the country should come up with a new constitution. He says: "I think the United States should start a constituent process to create a constituent assembly, a new truly democratic model ... It was capitalism that caused the ruin [in US]. Let the US empire end and let a great nation and great republic rise from the ruin ... It's time to shout 'Liberty!' again in the United States." The leftist leader has called for a new government to be free of the "dictatorship of the elite" such as big banks and corporations.

Are the US and European banks nearing a state of impending and inevitable destruction and ruin? What if all the bank depositors ask for withdrawal of their money at once. It remains to be seen whether or not the world will be witnessing such destructive scenario now or in immediate future, there is no denying that many, if not all, banks in US and Europe are facing the prospects of annihilation.

Despite an imminent political backlash on account of public sentiment, Republican and Democrat colleagues have succeeded in getting the bailout package approved by the Congress with a view to averting a collapse of capitalism or free markets.

Earlier, Financial Times, one of the most vocal advocates for the rescue plans for troubled financial institutions, has said the choice lawmakers face is between spending now on these schemes or spending even more later in the teeth of an unimaginable financial collapse. "These modern day heirs to Smoot and Hawley should realise that now is not a time for Hoovernomics," the newspaper says while referring to the Smoot-Hawley Tariff Act.

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