Why Wall Street Socialism will fail

As the Bear Stearns bailout proves once again, we have socialism for the rich and laissez-faire for the poor. But, as Kevin Phillips reminds us, socialism is just as self-destructive here as it was elsewhere. It eroded the Soviet Union from within until it collapsed like an old house hollowed by termites. Wall Street socialism is heading down the same road:

Socialism, we are told, is the naiveté of youth, and a fallacious economics the United States has luckily spurned.

Alas, nobody ever told the leaders of American finance. Whereas the old style of socialism elected no more than a handful of mayors and congressmen, Washington has now embraced a new variety that could not be more different in its class consciousness and privileged sponsorship.

To keep the people quiet and subservient, this new flavor of socialism was sold to them as the essense of American free enterprise:

Ex-Fed Chairman Alan Greenspan is often singled out as a culprit, but most of what he did was what most of the financial sector wanted. They, too, loved making 4th of July speeches about the glories of free enterprise and free -- market profits while counting on the government to collectivize the perils of risk. Big, fat and dumb financial institutions could count on being big, fat and bailed-out.

Phillips' argument is that by subsidizing and insulating the big and the fat, we're interfering with the market's organic system of identifying and eliminating unwise actions -- that is, we've hobbled the system by making it failure-proof for selected players. Look again at the Bear Stearns example. These people risk our pension and money-market funds, and when they make a killing, they enjoy all the rewards. But when they screw up, as they have spectacularly done lately, our tax dollars are pumped into their accounts to save them from their own mistakes.

It's not just bail-outs like this that subsidize big business. Both Hillary and Obama support socialized medicine, which will eliminate corporations from having to provide health benefits. The effect, of course, would be to shift these corporate costs to taxpayers.