Is financial innovation the ultimate unintended path towards socialism?

“Some banks are just going to explode if we do not nationalize them. Or if the Government does not buy their bad credit. This of course would translate into massive costs for the State. But we do have a problem anyway. There is nothing to do but a major intervention.

– And that’s the solution?

What? To nationalize all banks? Well, not really. But there is no other option. If the State buys all the junk credit, this is just like a huge subsidy. It can buy all banks instead and then make money.

– Does the State have money enough to do that?

Well if we trust the figures, the value of distressed banks is only 7% of the GDP. This is a lot, but only a part of the total value creation. At worst 20%. Other countries already did that.”

(from “Amerika muss seine Banken verstaatlichen”, Frankfurter Allgemeine, March 17 2008, available also in Spanish here)

That’s from an interview with NYU Stern School of Business economist Nouriel Roubini on the current credit crunch and financial debacle. In the light of other scholarly sources, this may also be described as the natural development of the internal contradictions of financial capitalism towards the achievement of socialist revolution. No?

No kidding. Maybe the social-scientific avant-garde of the socialization of finance would soon be called to the glorious task of thinking through the “how” of this unmissable opportunity for economic experimentation.


  1. Very nice post!
    There are many potential points of discussion here, and a quick comment is not the right medium for this. But, this shows us, yet again, that a vulgar distinction between socialists and capitalists exists only in the minds of some academics, not in the real world…

  2. panik

    Wasn’t it the anarcho-syndicalists who always accused mainstream communists and socialists of just being state capitalists. The other side of the same coin, as it were!

  3. Yuval, panik,

    Well, this is probably a sort of a wild hypothesis. And of course, nationalization and socialization (in the socialist sense) are two different things. But everything can happen. Imagine that JP Morgan gets inspiration from the governance model of, say, Mondragón Cooperative Corporation and that everybody in the financial services industry happens to think that this is fine (especially if some special political commissars are appointed to suggest so, on behalf of a transitional collectivized ownership). Or, why not, that the Central Committee of the Communist Party of China decides that buying all these banks can be the vehicle for the implementation of Hu Jintao’s Harmonious Society Soup.

  4. estrellasonora

    How ironic, “Is financial innovation the ultimate unintended path towards socialism?” This is so good it makes me twinge with embarrassment!

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