Socialism: Should Investors Panic?
Recent government capital infusions have led to uncommon agreement that the U.S. is moving towards socialism. It's hard to argue with this conclusion. Just look at the automobile industry, AIG, trillions of dollars of TARP money and pending health care reform.
It's a feeding frenzy for the media, politicians and especially financial pundits. Socialism must be terrible for investors. After all, it's the end of the of the "free market system." Should you hunker down and prepare for limited growth and dismal returns?
Not if you take a look at historical data.
That's exactly what Weston J. Wellington, Vice President of Dimensional Fund Advisors, did in a thoughtful presentation entitled "What Should Investors Do Now?".
Wellington used data from the Heritage Foundation to rank countries based on the amount of economic freedom in that country. The results were very interesting. Socialist leaning countries (like Sweden, Norway, Denmark, Spain and France) all outperformed the U.S. for the thirty-eight year period from January 1, 1970 to December 31, 2008.
France represents an economy much reviled by politicians and pundits alike. Not only is it Socialist leaning, but it has a comprehensive, government run health care system. That's the pariah the health care industry is spending hundreds of millions of dollars to avoid in the U.S.
Equity returns in France during this period were 10.35% vs. 9.12% in the U.S.
I'm not advocating socialism. All I'm saying is that those who raise the socialism boogeyman as a way to frighten investors either don't know the data or are intentionally misleading them.
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"Don't know the data"? Umm...why do you need data to know that we are rushing into socialism. The government is involved in stuff...lots of stuff. Thats socialism on its way to communism.
I would like to know what Dan Solin's definition of 'socialism' is.
Socialism is a form of mass compassion. Capitolism is a form of mass creativity. The ideal situation is one where capitolism and socialism balance each other. That way, everyone is fed, sheltered, taken care of when they are sick, and able to express their creativity in entrepreneurial endevours. No one is advocating the end of capitolism, just a balance to the inequality inherent in the financial system.
You can change the outcome dramatically by which 38 year period you want to choose. In fact, if they would have stopped at 2007 instead of 2008, the results would have been quite different.
This is one of those " studies " where you can choose any number of years or time period and come up with results that would prove your point of view. I know I could make the data prove that socialism is bad for investment, just like this study says it wasn't so bad, or even a little better than a " free market " system.
I don't think one year would have made much difference when we're talking about a 38 year period. Face it, we've killed the Golden Goose with deregulation.
The results were very interesting. Socialist leaning countries (like Sweden, Norway, Denmark, Spain and France) all outperformed the U.S. for the thirty-eight year period from January 1, 1970 to December 31, 2008.
France represents an economy much reviled by politicians and pundits alike. Not only is it Socialist leaning, but it has a comprehensive, government run health care system. That's the pariah the health care industry is spending hundreds of millions of dollars to avoid in the U.S.
Equity returns in France during this period were 10.35% vs. 9.12% in the U.S.
Yep, it could make a dramatic difference, especially when the last 4 months of 2008 had such a dramatic drop in the United States.
Like I said, if I wanted to prove either market system, I could have chosen the data to support that viewpoint.
Extremism of any form is bad, it always leads to bad consequences.
Extreme forms of capitalism are bad, as it is proving itself to be now.
This rabid from of "free market" capitalism, is nothing more than a way to rationalize extreme greed, and short term profits at the expense of the long term health of our economy.
Enough is enough!
A healthy economy needs a balanced mix of socialism and capitalism in order to flourish and serve the needs of all the people.
Health care is spending hundreds of millions of dollars to KEEP their stranglehold and their profits! Better they should spend that money doing something for the millions of working poor in this country.
Twenty-nine years ago $18,000 a year was GOOD money, not vast riches but a comfortable income. I make $18,000 a year now and all I support is myself, I'm in the working poor these days because of the part of the country I live in. Northern New England does not allow heat to be "optional" and local rents are pretty unbelievable compared to other parts of the country. Jobs are no easier to find here either. I cannot afford $600 a month for health care with $700 a month rent, $200 a month heat (on the budget plan) and electricity between $100 and $300 a month.
Then came ol' ronnie raygun w/his "A rising tide lifts all boats". Trouble is, when some of the biggest boats rise, they swamp the little ones.
republicans! Sheeesh!
It's Democracy versus plutocracy.
Democracy, the worst form of governmnet except all the the others. The 51% leading the 49%.
Plutocracy, the .1% ruling over the 99.9%. And you don't get to vote.
The conservatives want to demonize, destroy, bankrupt the democratic government,
so the plutocracy can rule unimpeded,
There are no other alternatives.
Choose.
Can't resist --
Businessman to bartender "I stopped pursuing the American dream when I found out it means I'd need to move to France".
Wiley "Non Sequitur" June 19, 2009 comic strip
That's so funny. The article outlines how much better socialist leaning countries are doing in terms of growth, healthcare, and then the author says, "I'm not advocating socialism".
It's like some saying, oh, these countries have found a cure for cancer, but I'm not advocating a cure for cancer. And the posters rail against a cure for cancer, saying its their right to have cancer, their choice!
Others in history had cancer and they will too!
Wow, a truth teller! From Wall Street!!
No, everyone SHOULD PANIC BECAUSE people are so stupid & ignorant
that they BELIEVE EVERY REPUBLICAN LIE they hear.
Republicans believe in SOCIALISM FOR THE RICH and zilch for anyone else.
Who do anti-socialists call when their house is on fire?
how do anti-socialist drivers get across the river?
America is not good enough for Socialism!
We are using Socialism to save Capitalism.
Very bad for investors. Great for traders. Short the market. Buy Goldman as they will make another fortune running Cap N Trade.
Steve-in-abq: It's not about the money, it's about freedom. Freedom to choose.
Dem/Lib: But the government can take care of everything.
Steve-in-abq: I don't want them to take care of everything.
Dem/Lib: It will happen. Stop whining.
That's fine if you have enough money. If you have enough money, you can force other to do your will by limiting their choices or undercutting their ability to compete (one of the ugly little secrets of NAFTA and other free trade agreements). Unfettered markets lead to economic feudalism. The only ones who are "free" are the those with enough money. Everyone else is a slave. The notion that freedom is only governmental is an illusion.
Freedom from worry about access to health care? Freedom from student loans? Freedom from usury rates on credit cards? What 'freedom"?
Freedom from worry about health care for you and your children?
When will they give the poor freedom to choose?
Freedom (options) and choice are closely related. We all make choices that can limit our choices in the future. If we make wise choices we can increase our options for the future. And poor choices can lead to fewer options.
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