With the passage of the $700 billion dollar financial rescue plan, the U.S moved closer to socialism, but no closer to a crisis resolution. For a nation that prided itself on capitalism, looking down its collective nose at socialism, nationalizing bad debt was an easy out. But by bailing out banks, insurance companies and investment firms, lenders were helped and homeowners ignored.
Rethinking How Markets Work
It’s also a startling admission that free markets don’t work. Contrary to Adam Smith's invisible hand theory , espoused in The Wealth of Nations, and embraced by Wall Street, individuals and corporations pursuing their own self-interests do not necessarily promote the best interests of society as a whole. The invisible hand that was supposed to guide the market has, in the end, pick-pocketed taxpayers. Where does all of this lead?
What Went Wrong with the Financial Bailout Plan?
Under capitalism, individuals and corporations pursuing their own self-interests would promote the best interest of society as a whole. What actually happened was that in the pursuit of profits, risks were ignored. Corporate responsibility fell by the wayside. Now, U.S. taxpayer dollars are on the line. In the largest bailout since the Great Depression, the U.S has made choices that will reverberate for years to come.
Already a huge sea-change has occurred. The U.S government is now the largest taxpayer-owed bank and the ultimate risk manager. The dominance it enjoyed as the world’s leading financial superpower has been greatly diminished. The IOUs held by foreign investors will tie the new administration’s hands in any foreign dealings, financial or otherwise.
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