By A. G. Moore 3/18/2013
Mussolini’s March on Rome, 1922
Following a Washington Post Article (Why today’s Cyprus bailout could be the start of the next financial crisis by Neil Irwin), several readers blamed “socialism” for the pain Cypriot bank depositors are about to feel.
These comments are an interesting study in perspective. A brief consideration of socialism might yield a different conclusion: the EU is acting more on a fascist than a socialist model.
The chief distinction between classic socialism and fascism is the treatment of private profit. Both socialism and fascism assume control of industry; fascism does so in cooperation with corporate leaders (see the Mussolini and Hitler models). Private profit is maintained and encouraged. This is not the case in socialism: the means of production and the output are enjoyed by the state.
An analysis of the IMF/EU bank bailout plan for Cyprus reveals that profit is very much on everyone’s mind. The EU is not asking bondholders to take a hit; it’s demanding that consumers bail out the bondholders. And in bailing out bondholders, the corporate viability of the banks is assured. Not just Cypriot banks, but the entire interconnected EU banking system.
Now it might be argued–and is argued–that preserving the integrity of the banks insures the economic and social stability of Europe. This may be true, but this argument is the essence of fascism, not socialism. Mussolini explained his corporatism by saying it was for the good of all Italians. He had to preserve the integrity of the banks in order to protect the Italian economy.
Hitler likewise harnessed industry in order to realize his national purpose. Under Hitler’s brand of fascism, corporate allies prospered. Private property was preserved.
It seems, as the after shocks of the 2008 financial crisis continue to ripple through the world economy, that the socialist model is the furthest thing from the minds of those who control the flow of money. The banks and Western governments, in alliance, have decided that bank failure is unthinkable. There is a bill due for lack of sound practice. But this bill will not be paid by those who were the architects of failure. The Western European and US government/corporate alliance has decided that the corporation is indispensable and therefore immune to penalty. Profit must be preserved but someone has to pay.
Thus Greeks are assessed crippling property taxes and utility bills. Spaniards are burdened with inescapable personal debt. And Cypriots’ bank deposits are confiscated.
The cure devised by the EU for its strapped member states is hardly socialist. However, if the profit-incentived European Central Bank and the IMF continue on the short-sighted course of corporate support despite public pain, socialism may indeed be the result.
In this case, it will not be depositors who are assessed a fee for offenses not committed, but the corporate bankers and their government enablers who will have their pockets picked in order to insure that the books balance.
Fascism, By Sheldon Richman
Library of Economics and Liberty
Socialism By Robert Heilbronner
Library of Economics and Liberty
Institute for Industrial Reconstruction
Senior Bonds: Last Ones Standing