“Socialists, like Hugo Chavez in Venezuela or Indira Gandhi in India, are famous for nationalising the biggest corporations. But the US government has taken over three of its biggest corporations within two weeks. Has the US turned socialist?The column however concludes that this is not similar to nationalisations as they occurred in the socialist contexts:
American right-wingers moan that this is indeed the case. Meanwhile, Indian leftists are stunned at nationalisation in a country they view as pitilessly capitalist.
Two of the nationalised corporations, Fannie May and Freddie Mac, are by far the biggest mortgage lenders in the world, with $5 trillion of mortgages and loans on their books. That's five times India's GDP, to put their size in perspective. The third corporation , AIG, is the biggest insurance company in the world. No nationalisation in professedly socialist countries were ever so big.
The usual procedure in a capitalist welfare state is to let mismanaged companies go bust, penalising the shareholders and managers, and then provide safety nets to those adversely affected. But when corporations are so large that their collapse would endanger the entire financial system, it's sensible even from a capitalist viewpoint to have a government takeover before they collapse . This is a sort of pre-emptive safety net. Moreover, preventing distress wins votes (or at least doesn't lose them), and that's vital in a democracy.”
“The US takeovers, by contrast, are temporary affairs, to be followed by re-privatisation once the crisis is resolved. The corporations will be obliged to sell chunks of their assets to pay off debts and attain stability. They will then be re-privatised. They will emerge greatly shrunken, and perhaps broken into smaller units.
Nationalisation is a misleading word for this process. It is better called forced restructuring by the government, as a pre-emptive safety net. It aims to save citizens from pain, but within a market economy framework.”