Fixing What's Really Broken

Benjamin Barber at The Huffington Post writes:

QUESTION: What's the difference between capitalism and socialism according to Henry Paulson?

ANSWER: Socialism is when big government steals from the banks to bail out the people; capitalism is when big government steals from the people to bail out the banks.

In an article in The NYT, Adam S. Posen , an economist at the Peterson Institute for International Economics, says, “It is profound, and it is something of a shift back to the state. But is this a recasting of capitalism? I think what we’ll see is that the government acts as a silent partner and gets out as soon as it can.”

However we define the help we're getting, the Republicans, who've had the closely-held idea of an unregulated free market wrested from their grasp with the original $750 billion dollary bailout, now have to, simultaneously, watch as the banking industry is, in effect, nationalized. (On Monday, large American banks agreed to accept government investments totaling $125 billion with another $125 billion to be invested in smaller banks.)

Treasury Secretary Henry M. Paulson, Jr. might be squeamish about framing this help, but he is not squeamish about supplying it.

In another article in The New York Times Paulson says the $250 billion dollar government infusion of government money into banks is regrettable but necessary. The NYT article says that "[i]n addition to injecting money into the banks, according to the plan, the United States would also guarantee new debt issued by banks for three years — a measure meant to encourage the banks to resume lending to one another and to customers."



According to Paulson:

The alternative of leaving businesses and consumers without access to financing is totally unacceptable. When financing isn’t available, consumers and businesses shrink their spending, which leads to businesses cutting jobs and even closing up shop.

Which brings us back to the Question and Answer. From Benjamin Barber's article:

Which is to say we are not going to see any recognition that overproduction and over consuming by a capitalist system that manufactures needs rather than goods to sell all the stuff it has to sell to stay afloat is what really lies behind the crisis. Or that capitalism must change its ways - like producing goods we actually need and taking responsibility for bad decisions it makes. On the contrary, the market's heading up (for a day at least), and the credit pump is being primed so consumers will start spending again, and we can go back to where we were before phase one of the crisis started. Back to spending our way to phase two of the crisis.

How to fix what's broken while creating something new? And have the people who need to learn a lesson from all of this really learned the lesson they needed to?