It used to be synonymous with authoritarian regimes, now politicians threaten it and media call it a ‘necessary evil.’
In America, “nationalization” used to be a dirty word. But that was prior to this era of government intervention to save industries and institutions deemed “too big to fail.” Now, state involvement in – and even ownership of – certain sectors of the national economy is called a “necessary evil.”
The markets may not see it as necessary, but they’ve made no bones about it being evil. The mere mention of nationalized banks by a prominent senator sent the Dow Jones into a tail spin.
With good reason, too. Vladimir Lenin wrote an entire book about it with “On Worker’s Control and the Nationalization of Industry.” Mao Zedong of China nationalized all land and equally distributed it to landowners and peasants when he came into power in the 1940s. More recently, Venezuelan dictator Hugo Chavez had no qualms with nationalization, evident from his seizing of several private sector industries as he has ascended to power.
Not very good company. But although many in the media haven’t recognized it, some of the talk of nationalization in the present-day United States sounds eerily familiar. As CNBC’s Jim Cramer pointed out on MSNBC’s Feb. 2 “Morning Joe,” its sounding a lot like Lenin.
“It’s the time for nationalization, and I’ll say this,” Cramer said. “Either the new economic policy Lenin, or it’s the initial storm-the-winter palace Lenin. I’m not quite sure yet. It’s a mid-’20s situation. It could go either way.”
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Although a recent Rasmussen Poll showed 75 percent of Americans oppose nationalization, and despite all the negative publicity the term has been associated with over the past 70 years, some in the media don’t seem to understand its history and consequences.
Bank Nationalization: Seeds Sewn By Politicians
With fears that the American banking system is teetering on the verge of collapse, and banking giants Citigroup (NYSE:C) and Bank of America (NYSE:BAC) are struggling, political figures in Washington, D.C., have been pushing to nationalize these big banks, but not without some serious reaction by the private sector.
Senate Banking Committee Chairman Sen. Chris Dodd, D-Conn., often considered as the most influential member of the Senate regarding the oversight of the banking industry, created a market turmoil when reports surfaced that he suggested in a Bloomberg Television interview that nationalization might be the only option for the government to save the banking system.
“I don’t welcome that at all, but I could see how it [nationalization] is possible it may happen,” Dodd said on the Feb. 20 “Political Capital with Al Hunt.” “I’m concerned that we may end up having to do that, at least for a short time.”
Reports of Dodd’s remarks sent the Dow Jones Industrial Average (DJIA) reeling more than 200 points (nearly 3 percent), until White House Press Secretary Robert Gibbs squelched those rumors later in the trading day.
“This administration continues to strongly believe that a privately held banking system is the correct way to go, ensuring that they are regulated sufficiently by this government,” Gibbs said at the Feb. 20 White House press gaggle. “[I] think I was very clear about the system that this country has and will continue to have.”
That caused the Dow to rebound, even briefly reaching positive territory before finishing down 100 points.