Nationalization

Nationalization is a word that gives every good capitalist, and lots of us slightly less good capitalists, the shivers. Experience has proven that (a)governments are lousy at running entrepeneurial enterprises and (b)giving the government huge chunks of the economy seriously constrains everybody else's freedom.

The problem we have is that several huge banks, notably Citi and Bank America, made a bunch of bad loans and are seriously insolvent, despite already enormous injections of taxpayer money. The money involved is more than the GDPs of most countries, and there is a well-founded fear that their collapse could spread an Iceland-like financial armageddon to the entire world.

Kevin Drum takes a look at the voices for nationalization and especially at the mostly admired Swedish experience in nationalization in the 1990s. His tentative conclusion: let's not get hasty.

So is this what we should do? I don't have the financial chops to say — though certainly government ownership makes the "bad bank" idea a lot easier to implement. But if we think the Swedish model is worth taking guidance from, the path ahead includes systemic debt guarantees, capital injections, a bad bank for toxic waste, and nationalization only as a last resort.

Of course it's plenty ironic that the most conservative government since Hoover led us into a situation where that very government decided that it needed to massively intervene in the economy and is talking about nationalization. Whatever we do, let's not get our butts in this kind of a crack again anytime soon - once per century is more than enough.