Capitalism's worst financial crisis since the Great Depression of the 1930s has provoked traditional socialists to follow this vogue and announce the death of capitalism and to hark back nostalgically to the time when nationalisation was the name of the game and privatization was a dirty word. Many people have been making the argument that socialism had been vindicated and that the nationalisation of a country's chief economic players must now be resorted to if the world economic order is to be saved. This line of thought is a nostalgic pipe-dream based on an erroneous assumption. There seems to be an obvious confusion between the necessity of a serious regulatory regime on one hand and strict control through state ownership of financial institutions on the other. Regulation by the state is not the same as absolute state control in socialist fashion.
This line of thought is a nostalgic pipe-dream based on an erroneous assumption. There seems to be an obvious confusion between the necessity of a serious regulatory regime on one hand and strict control through state ownership of financial institutions on the other. Regulation by the state is not the same as absolute state control in socialist fashion. What has failed miserably is not capitalism but the regulatory regime that is necessary to ensure that the capitalist system is not abused by greed. The financial crash has only shown how erroneous the idea of some extreme libertarians who argue that democracy fails the tradition because it subordinates to the public interests is. This, however, does not mean that capitalism 'per se' is no longer a meaningful and effective economic system when duly regulated to restrain excessive human greed and abuse. Electrocution calls for stricter observance of regulations and not for the prohibition of electricity! The world financial disaster is the result of Wall Street yuppies ridiculing the notion of money by deliberately ignoring the rules. In the US, in fact, the Bush administration gave the nod to blatant disregard of the regulatory regime that should have been in place. The institutions that were obliged to ensure that this does not happen closed more than a Nelson's eye as they were practically encouraged by Washington to knowingly abandon their own rules.
Yet, the experience of the recent financial disaster should only lead to the serious observance and fine-tuning of existing regulatory regimes and not to the notion that financial institutions should belong to the state. Socialism is the wrong tool to overcome the financial crisis, more so in Malta where we have not been directly hit because our regulatory regime withstood the test. We are now being hit by the effects of the crisis because our industrial and tourism sectors depend solely on consumer spending abroad. Giving out money for free to 'stimulate' these sectors - as some are suggesting - can never influence consumer spending abroad, while instigating consumer spending in Malta will only translate to our importing more goods and stimulating other economies. If Malta is to come out of the crisis in good shape, the tight-rope walking exercise that is on the cards cannot be inspired by socialist policies.
