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As others turn towards Chinese-style state capitalism to save the global economy, ‘we’re all socialists now’
- There is a grudging recognition that the state’s role has to be accepted and even strengthened to avoid economic collapse, as governments take stakes in companies and central banks buy up debt in a ‘socialisation of finance’
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The phrase “we're all socialists now” is being heard often, of late, as the state rides to the rescue of everything from overloaded health care systems to distressed financial systems. Yet the implications of growing state involvement in business and finance are perhaps not fully appreciated.
Chinese-style state capitalism could end up scoring more points as a model for sustainability than market systems that are prone to frequent crises (for which blame cannot always be laid at the door of the coronavirus). Dealing with the latest crisis is going to require a hefty injection of socialism.
It was British chancellor of the exchequer and liberal politician Sir William Harcourt who reportedly first used the phrase “we’re all socialists now” in the 1880s, and US president Richard Nixon who supposedly adapted it a century or so later to suggest that “we’re all Keynesians now”.
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To have socialist or Keynesian inclinations has long been seen by free-market champions as something deserving of suspicion and scorn. A grudging recognition is forming now, however, that the role of the state has to be accepted and even strengthened to avoid an economic collapse.
There have been striking recent illustrations of this fact lately. One is what veteran Japan financial analyst Jesper Koll (among others) describes as the growing “socialisation of finance” as central banks around the world buy up vast chunks of debt from banks and financial institutions.
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Much of this debt will, in all probability, have to be converted into equity as a badly hobbled global economy makes it difficult, if not impossible, for debtors to repay loans. Whether that equity continues to be held by central banks or is transferred to state holding companies, it becomes “socialised”.
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