If you ever want an example of the crisis of credibility of liberalism today, just look at the banking sector. Ever since 2007, the liberal world has been bailing out banks with taxpayers money, leaving profits to shareholders. Adam Smith would say, let the markets handle it, let the markets get rid of inefficient banks. The modern liberal world says, keep the inefficiency going on, let it parasitically drain wealth from society.
What’s even more absurd is that bailouts are often managed by left leaning governments. Yes, the ones who claim they want to redistribute wealth from the rich to the poor have been doing the exact opposite, transferring wealth from the poor to the rich. With the fall of the Soviet Union, central economic planning was discredited, so socialists were forced to look elsewhere for an economic model: they shifted to the center, the so called “third way” of Tony Blair and Bill Clinton No more class struggle, but globalization and financialization became the mantra of the day. Bailouts complete the treason against the working class. Now that financialization is failing, they are desperately trying to keep the casino going. The hypocrisy is never ending: when the working class asks for government intervention against globalization, the “new Left” responds with mockery levelled at the ignorant common man, but when the financial world is calling for help, then government intervention is “necessary”.
The last chapter of this mockery comes from Italy: Banca Popolare di Vicenza and Veneto Banca are two of the many Italian banks in deep trouble because of non-performing loans. An issue similar to that of Spanish Banco Popular, which was , bought by Santander at a nominal fee of 1 euro. The explicit will of the Spanish government was to avoid another bailout from the taxpayers, as the previous one of Bankia had cost the Spanish state €41 billion.1)Sticking to liberal economics, the Spanish state opted to let the invisible hand sort it out.
The Italian government saw it differently. The irony is shrieking as the ruling Democratic Party until 1991 was known as the “Italian Communist Party” (PCI), becoming then “Democrats of the Left (Democratici di Sinistra, DS) until 2007, when it changed to its current denomination. The name change was accompanied with a gradual ideological change from socialism to liberalism, yet the decision on the troubled banks shows that the Italian Democrats stand for neither; with the praise of Italian liberal economists,2)the troubled Italian banks will be split into “good banks’’ bought at a nominal fee by the Italian bank Intesa San Paolo and “bad banks”, an essentially bankrupt companies of the size of €20 billion, backed by the Italian state3)and thus the taxpayer. Private profits, socialized losses; from socialism, to liberalism, to inverted socialism, courtesy of the former Robin Hood of politics.