Feb 22, 2009

America's biggest fear

Glen Beck recently had a segment in his show on Fox News - the camera pans over a graphical skyline with towering high rises labelled Capitalism and very quickly moves to plateaus with sand dunes that have tall buildings (not high rises - mind you!) labelled Socialism and then the camera traces a valley (like in a pit!) that shows tenements labelled Communism. Although I did not hear the words accompanied this shot (I was tuned into the music in my head), it struck me that America is now afraid that this financial crisis represents the end of Capitalism and the begin of a new era of Socialism.

Take two of the biggest social reforms that are being suggested - one that has become so trite and has been discussed so often - is the Health care reform. The other - which is just now surfacing - is the Nationalization of banks! We've all heard Obama's manifesto for the election - Expanding the coverage for children from under insured and low income families, covering basic health screening, and picking up part of the COBRA (bridge coverage) to help families without a job before they get back into employer coverage. While Congress works on the details of his vision, there are other think tanks suggesting Nationalization of banks as another avenue to prevent this kind of a financial melt down in the future.

The first thought that came to mind when I heard this was - this sounds like Indira Gandhi back in the 80's in India trying to control inflation by controlling the lending institutions and what loans they dole out.

For India, where infrastructure development was the primary objective, it was essential. So the idea was good even though (as is the norm with any initiative like this) was executed very poorly. For the US, while this allows for a careful evaluation of the risk in the investment, regulating some of the greed involved, it cannot be expected to be a panacea for all evil.

But all that aside, what is interesting is - after experimenting with Capitalism, this country is now dabbling with and adopting some of the highlights of Socialism. It is no longer a game where the stakes are high and the winner takes all. It is moving towards - the stakes are controlled depending on the risk involved so the winnings are controlled. So what does that do to "Land of opportunity"? I see a lot of opportunity for "Risk analysts" :-)

Send me your thoughts in your comments...

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