While you are enjoying your Danish and morning coffee (you can still buy a cheese Danish, can’t you? They haven't been banned by the food police, have they?), I am looking out for your interest. My coffee comes with a dose of Squawk Box. No, not some electronic gizmo. It is the CNBC business channel “Good Morning” show. It actually isn’t as awful as it sounds. In fact, one gets more hard news from it than most other “good morning” shows which usually come with a large dose of fluff. What’s that? Demi Moore is in rehab? Who knew? Where’s Ashton Kutcher when you need him?
At any rate, every January there is a world conference of the financial powers that be, both political and titans of industry, held in Davos, Switzerland. If you want to know why the world economy is in the tank… the smartest men in the room go to Davos, Switzerland in the middle of winter for a conference. Why?
CNBC usually gets lots of anecdotal stories from this event. Where else can you interview George Soros, Warren Buffett, the President of Coca Cola and Angela Merckle (Chancellor of Germany) all at the same place? Sometimes the stories are amusing. Sometimes you can pick some tidbits to help your stock trading from company presidents. Then there is the ever popular segment about business television hosts wearing funny snow hats. Quite amusing.
This year is different. With the Europe on the verge of collapse and the United States mounting piles of debt beyond anything that can be repaid, business, financial and political leaders are examining the very essence of capitalism. They have concluded that capitalism as we currently understand it, has failed us. It needs to be reviewed and redefined. It needs to align more closely with the "needs of the people." It needs to be controlled, massaged, yanked in. It needs to become more like the “state” capitalism that exist to a large degree in Europe, and to a much larger degree in China.
Wikipedia defines state capitalism as “commercial (profit-seeking) economic activity undertaken by the state with management of the productive forces in a capitalist manner, even if the state is nominally socialist. State capitalism is usually characterized by the dominance or existence of a significant number of state-owned business enterprises.” Oye!!!! More subtle definitions include countries in which the state highly regulates privately owned corporation, and/or determines which corporations get credit, usually with strings attached to benefit projects of the state. All of this applies to China. Much of it applies to France and the bulk of the European Union. The goal is ultimately for private business to serve the needs of the state first. There was even serious discussion that countries that practice state capitalism will leave countries like the United States in the dust within the next five years.
So now that you are totally bored, what’s that have to do with the United States? Look at what is happening here. General Motors is owned by the government. The Obama administration now controls who gets loans to go to college, and is now trying to establish guidelines that universities must meet in order to accept students with government controlled loans. It is cherry picking industries who benefit from government largesse (Solyndra) and those who get up the proverbial whazzoo (think the car dealerships the government forced to close when it took control of GM and Chrysler).
This is scary stuff. What is even scarier that it was being seriously discussed by the president of Coca Cola this morning on CNBC as something that ought to be considered. Maybe it was that cold mountain air and snow in Switzerland. Or maybe it was the funny hats that the hosts were wearing. Or maybe he is afraid of the Bully in Chief Obama, who has shown a willingness to throw private enterprise under the bus in order to achieve his “state” capitalism dreams…which by any other name is socialism.
At the end of the day, the financial problems the world today are experiencing have nothing at all to do with capitalism, but with some really bad judgments made by governments over the past years. They spent too much. They borrowed too much. They printed too much money. That happens in all types of economic systems. That was the root problems of the workers’ paradise, the Soviet Union…and the problem in Europe…and the problem in the United States. The only way to fix capitalism or socialism or any other kind of “ism” is don’t do those things.
But that’s a hard lesson to learn.
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