Simple Economics IV: Nationalization

Once again, I find myself explaining concepts discussed in the media but rarely ever explained by the media. Today’s discussion is “nationalization” of the banking industry.

Or, how about “bankruptcy?” In a bankruptcy of a business, the debt and assets of the company are assumed by the government, who then restructures the company and if necessary, sells of the company’s debts to cover the liens against the company. Then the company is either released to continue or else is sold outright to some buyer who wants a good deal.

If this sounds at all familiar, that’s most likely because this is precisely the remedy proscribed by Dean Baker, Paul Krugman and almost every single other serious minded economist whose looked our current situation. To the extent that the federal government is involved in the day to day operations of businesses in bankruptcy, yes, it is nationalization. But this kind of thing happens all the time to all kinds of businesses without a peep of objection from the Republicans in Congress. In fact, it even happens to local banks all the time, which is one reason that we have a thing called the FDIC.

But it doesn’t happen to the big boys who have the money to pay off politicians and drive the conversation in the most objectionable direction possible.

Interesting side note: guess what the Republican, Dick Shelby proscription is for the Detroit automakers? If you guessed “nationalization,” you’re right!

By Tommy Belknap

Owner, developer, editor of DragonFlyEye.Net, Tom Belknap is also a freelance journalist for The 585 lifestyle magazine. He lives in the Rochester area with his wife and son.