February 16, 2009

IT'S ALL IN THE NAME:

Nationalization, or Pre-privatization? (Greg Mankiw, 2/16/09)

The search for alternative names can be amusing at first, but I think there is more here than mere semantics.

Why are people scared about the idea of nationalization? One reason is that it is a sign of the depth of our problems. A second, more substantive reason is that it seems to point in a bad direction. I certainly do not want the government deciding who deserves credit and who does not, what kind of investments are worthy of financing and what kind are not. That is a big step toward crony capitalism, where the politically connected get the goodies, and economic stagnation awaits the rest of us.

If the government is to intervene in a big way to fix the banking system, "nationalization" is the wrong word because it suggests the wrong endgame. If banks are as insolvent as some analysts claim, then the goal should be a massive reorganization of these financial institutions. Some might call it nationalization, but more accurately it would be a type of bankruptcy procedure.


Why not just call it "resale"?

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Posted by Orrin Judd at February 16, 2009 8:22 AM
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