This is another in what I hope to be a month long series of aphoristic (ἀφορισμός) essays, meant to provoke thought rather than explain it. The hope is that, built up on each other, the series will provide a matrix of thoughts that together might lead the reader in new directions. Though each can be read independently of the others, they are intended to be read together and against each other.
With the fall of the Soviet Union and its Empire in the late 1980s, the freedom loving West hailed the event as the final discrediting of state inter-meddling in economic affairs. The Soviet era stood as a symbol of the bankruptcy of state entanglement with business and a warning about the inevitable futility of state policy grounded in micro management of enterprises form centralized ministries. As the People's Republic of China adapted to the new system, even important Marxist Leninist states appeared to embrace at least the notion of devolution and indirect control. Only small and sadly poor states remained as an anachronistic reminder of the fallacies of a century's worth of centralized mass mercantilism.
But, of course, these panegyrics in the form of policy were all sadly premature. As many African and Latin American states have taught, the state and its apparatus remains a rich prize for capture (at least for the capture of its ability to direct wealth as those in control of its ministries direct) and a central nexus point for control. Thus the new face of control is not Marxist Leninist, it is fascist--understood not in its demonized Italian post 1937 form--but in the form of a kinder and gentler oozing of control in which state and private power are blended for the specific benefit of its leaders and the general benefit of the masses.
The new face of controlled economic activity is not a Soviet or Cuban nomenklatura, but the state-private bureaucratized management of AIG. Hugh Son, AIG May Restructure Rescue Package for Second Time (Update4), Bloomberg.com (Feb. 24, 2009).
AIG had to seek an $85 billion federal loan in September after credit-rating downgrades left the company facing the possibility of more than $10 billion in collateral calls from debt investors who bought credit-default swaps from the insurer. The bailout, which includes handing the government an 80 percent stake in AIG, expanded to about $150 billion in November, partly to fund an entity designed to retire the swap contracts by purchasing the underlying assets from banks.There is a thin line between state policy that targets economic welfare maximization, and state policy that equates the interests of the most important economic actors in a state with the interests of the state itself. There are many examples throughout history of this amalgamation in many states and in many epochs--each with its own peculiar characteristics. The economic and social history of the United States in the beginning 21st century, like that of this state a century earlier, may suggest another variation in the old story of the amalgamation of private economic and public political power. Its consequences will likely be as profound now as it was at the time that the great industrial barons
AIG may convert the government’s preferred shares into common stock to reduce pressure on the company’s cash flow, a person familiar with the situation said yesterday. New York- based AIG pays a 10 percent dividend on preferred stock, and none on common shares. AIG fell in New York trading.
AIG, led by Chief Executive Officer Edward Liddy, may try to repay as much as $60 billion of U.S. loans with a combination of cash, debt and equity, and by selling stakes in subsidiaries such as life-insurance units in Asia, the Wall Street Journal reported, citing unidentified people familiar with the plans.
“We continue to work with the Federal Reserve Bank of New York to evaluate potential new alternatives for addressing AIG’s financial challenges,” said AIG spokeswoman Christina Pretto, declining to be more specific. (Ibid).