Should Capitalism be Bailed Out? PDF Print E-mail
Economics
Written by Dada Vedaprajiananda   
In the past few months we have been hearing about a lot of “bail outs” in Washington. First there was a $700 billion rescue package for the struggling banking system and then there was a proposed bailout for the big three automakers of Detroit.  While it may be possible to remedy some economic problems by “throwing money at them,” this approach will only work for a short time and eventually we will have to look at the real causes of the problems and address them accordingly.

So does this mean that we should not take any corrective action at this time? No, we definitely have to act to prevent the suffering of many thousands and millions of people. During the depression of the 1930s the agony of unemployment and social upheaval could have been prevented or alleviated if the governments of the industrial countries had pursued better economic policies, say many historians and economists.

If that is the case, then in this present economic crisis we can only hope that those at the helm of the major economies make some wise decisions. Unfortunately some decisions have already been taken and maybe they were not so wise.

Let’s look at the banking system. The chairman of America’s Federal Reserve (the central bank) said that preventing the collapse of the financial system was essential. Sure, but what about the homeowners who will still be losing their homes, don’t they also deserve a bailout? That is precisely what economist Ravi Batra pleaded for prior to the implementation of the bank bailout. He said “The current problem is not with banks and financial institutions, but in the housing market. So the remedy should be applied there and nowhere else.”

Batra went on to say that “there should be a partial bailout of harried homeowners who cannot pay their mortgages,” explaining that if the homeowners paid their loans, then the banks would not need a rescue package. Batra’s proposed package for homeowners would have cost much less than the bailout for the Wall Street bigwigs and bankers, but unfortunately Washington was not listening to wise counsel.

Another opportunity for wise action is presented by the crisis of American automakers.  These automakers are on the verge of bankruptcy because they are still making huge “gas guzzling dinosaurs” in an age when oil is about to be replaced with alternative fuels. Should they be given a lot of money to go on with their folly or can we use this moment to improve the transportation system of the U.S. and the world?  

Michael Renner, of the WorldWatch Institute, said that any bailout for Detroit should be a “green bailout” and that money should only be given to the automakers if they are going to produce fuel efficient vehicles and that the bailout should also be tied to a new transportation policy in which emphasis will be placed on the development of rail, bus and mass transit systems.

Is such a radical change for Detroit possible? Renner cites the case of World War II when President Franklin Roosevelt ordered the auto industry to stop producing cars and use their full capacity for the war effort. This was indeed done, despite the initial objections of the automakers. Today’s economic and environmental crises are of wartime magnitude and require similar action.  Will this happen?  We can only hope so.

Even as we address these immediate problems we have to look at the bigger picture. The economic crisis of today is caused by policies and an economic system that favors the interests of a small segment of society. Rather than applying bandages to various wounds, it will be far better to replace capitalism with an economic set-up that brings economic and social justice to every single member of the human family.

References:

Ravi Batra, Bailout: The Crisis Profiteering, http://www.ravibatra.com/Bailout.html
Michael Renna, We Need a Green Bailout for Detroit,
http://www.ru.org/ecology-and-environment/we-need-a-green-bailout-for-detroit.html