Flash back to 2008. Bear Stearns fails, Lehman Brothers fails, the real estate market crashes, stocks sell off sharply, and the financial system gets a massive government bailout. Not only do you probably remember all that, but you also probably remember and might still be talking about how the Great Recession was all the fault of greedy bankers and a real sign of the terrible failings of capitalism.
Now it's time to put all of that in perspective. The economic woes America has suffered over the past seven years have certainly been serious. A lot of people did lose their homes, their jobs, and much of their savings. Excessive greed and dishonesty played a big role in it all, and I join the millions of Americans who continue to be disappointed that very few bank officials or brokerage house executives were ever indicted let alone put in jail. Of course I'd like to see the politicians who enabled the crisis be punished too, even as the federal government's role in creating the financial crisis gets less of the attention it deserves. But that aside, I'm thankful we did not see widespread chaos in our streets. We did not see people lining up by the thousands outside banks that were limiting withdrawals. The U.S. did get its credit rating lowered, but we never came close to defaulting on our national debt obligations.
But the Great Recession did produce something else on a very grand scale; anger, vitriol and lots of finger pointing. News reports, books, and even Hollywood movies were quickly out there blaming the greedy bankers for robbing the country. There was also an overreaction and massive backlash against free market ideals and capitalism, as if greed, failure, and criminal activity were their exclusive domain. And in what may be the most enduring reaction to the Great Recession, then-presidential candidate Barack Obama saw his poll numbers soar as soon as Lehman famously collapsed on September 15, 2008. He was helped enormously as he was seen as an opponent to the big banks, even though he voted for the massive TARP bank bailout two weeks later.
That was all to be expected. Hey, the Great Recession hurt a lot of people and when people get hurt there is almost always a reaction of some kind that ends up overdoing it. Capitalism took one on the chin in a big way and so did the party controlling the White House at the time. But here's the problem: what we're seeing in Greece right now is much, much worse than anything that's happened in the U.S. economically since 2008. Thousands of people over there truly are lining up outside the banks. Even more Greeks are starting to hoard cash, food, and medicine. This isn't just hurting the Greek people with overpriced homes or a bubble-inflated stock portfolio. That nation is on the heels of a real panic.
And yet while Greece's epic debt problems have dominated the news, I haven't heard very much about who is to blame for what's happened in that country. When any bank or other capitalist entity fails, the news media and the general public seem to name their favorite specific villains almost instantly. The word "profit" becomes dirty somehow and public figures start pining away for a more giving society that never was. But where is the condemnation of socialism and the failed politicians who peddled a proven failure of a system not only to the Greeks but to the half billion people who live in the E.U.? Where is the recognition that when the Greeks recently elected an even more leftist and socialist government, it sped up the path to collapse? Why is this Greek crisis being depicted as simply some kind of surprising isolated incident or the failure of a quirky nation that has some kind of unique set of challenges? Even if you watch all the great interviews Michelle Cabruso-Cabrera has been conducting on CNBC with ordinary Greek citizens, you won't hear socialism blamed by the people... ever. Even in the eye of one of the worst postwar economic storms in European history, socialism is getting yet another pass.
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Make no mistake, the classic weaknesses of socialism are playing out in as clear a way as you can possibly see them in Greece right now. Here they are: Greece ran out of other people's money. Greece's politicians made sweeping pension and benefit promises they could not keep. Greece expected to live in a fashion greater than the wealth it produced, etc. But I don't expect any bestselling books to be published in the coming year filled with anecdotes about socialist politicians who believed or didn't believe their own socialist lies. I don't expect Michael Moore or the big Hollywood studios to come out with movies about Greek pensioners making more in retirement than they did when they worked and then furiously threatening anyone who suggested they take some kind of cutback. And I can live with that because the best books and writings about the dangers and follies of socialism have probably already been written by Milton Friedman, Frederic Bastiat and Ludwig von Mises. And I doubt anyone could ever make better movies about the economic effects of socialism than Dr. Zhivago or Ninotchka. I'll live without the recognition of socialist mayhem from the entertainment media.
But the biggest problem with the rest of the media not identifying socialism as the culprit in this massive public failure goes beyond letting the guilty party go free. The real danger is that all the other nations and politicians currently pushing socialist programs on small and grand scales will not be slowed in the slightest by Greece's collapse. Dozens of U.S. states with unpayable pension obligations will continue moving along as usual. The federal government will continue to expand food stamp and medicaid rolls even as the economy improves. We're simply squandering the relatively free lesson we should be learning from someone else's massive socialist failure. We may not have changed much about our capital markets to help avoid a repeat of the 2008 crashes, but at least there was a very loud call for reform. Where's the call to fix the failed socialist model of the E.U. from a source other than American right wing talk radio?
That call is likely not going to come. Some kind of new deal will be worked out and the rest of the E.U. will try to generate enough wealth to placate the neverending welfare demands coming from its member countries. When it doesn't, this scenario will repeat itself over and over until a much more painful remedy for all of Europe and the world will take place. And it will all be because it's become too politically incorrect or burdensome to diagnose the clear cause of this economic malady.