When talking about the situation in the US, Boettke makes the point that the current crisis isn't, as yet, moving in a full blown socialist direction. Instead, he argues, the US is moving toward some sort of mixed ownership form, where resources are retained in some private hands, but also the public hand is deep in control. Such, it would appear, is the fate of the US banking industry.
Boettke goes on to say
We are in trouble but it is a crisis of ideas that is most troubling. We are marching toward corporatist system as fast as the votes will take us. Who will say NO to this?Later he writes
But there can be little doubt that we are turning over control of our economic life to the state as they did in Nazi Germany in the 1930s, and we must remember that the loss of our economic freedoms does entail an effective loss of political freedoms. F. A. Hayek 's The Road to Serfdom warned a free people how quickly they can lose their political freedom due to the pursuit even of well intentioned but poorly thought out ideas related to economic policy. Hayek's warning was directed at the Western allies, namely the UK and US, and he used Germany and Russia as his examples. At the time he wrote, intellectuals in the UK and US thought they could avoid the political pitfals of Germany and Russia while benefiting from the presumed 'superiority' of the economic model of government planning. Hayek's classic warning challenged that belief in the workability of democratic socialism.A little theatrical perhaps, but not without basis. The kinds of problems that mixed ownership can bring can been seen from the New Zealand experience with the SOEs. While many are not in actual mixed ownership, the pressures that such ownership can bring about can, nevertheless, be seen in our recent history with the SOEs.
Perhaps a more timely book to read than even Hayek would be Mises's Omnipotent Government and in particular the sections on the German economic model of national socialist policy. Our current policy path seems more along those lines, then outright expropriation of private property by the government. In the German model, Mises argued, private ownership was nominally maintained and the appearance of normal prices, wages and markets was kept. But in reality entrepeneurs were replaced by government appointed shop managers and the government dictated how the "capitalist" must use his funds and what wages workers must work for. Government effectively controlled production and distribution. "This is," as Mises put it, "socialism in the outward guise of capitalism. Some labels of capitalistic market economy are retained but they mean something entirely different from what they mean in a genuine market economy." (1944, p. 56)
This may very well be the direction we are heading. Slippery slopes, unintended consequences, regime uncertainty, etc., these are the concepts you need to understand in order to make sense of our current economic problems. Bad economic ideas have produced bad economic policies which in turn has resulted in bad economic consequences. The "solution" is not to be found in more bad ideas and bad public policies even if promoted by an eloquent and charismatic political leader.
The SOE Act states that SOEs, basically, have to be run like normal non-government owned firms. In effect this requirement is the same as you could get if private owners have a stake in a firm. The private owners would, we assume, wish to maximise profits, but the government may not. And you see this with SOEs. The government often wishes to intervene in the running of SOEs to get them to carry out not profit maximising activities, just as it would if it had a partial stake in a mixed ownership firm. This problem of having SOEs (or mixed ownership firms) trying to serve two masters was noted more than 10 years ago by Spicer, Emanuel and Powell in their book "Transforming Government Enterprises: Managing Radical Organisational Change in Deregulated Environments" (The Centre for Independent Studies, 1996). They warned that there are two pressures on SOE's: the first being towards privatisation since the productivity and efficiency gains achieved by SOE are in danger of being eroded over time. Privatisation is a way of both cementing in the commercial orientation of enterprises and wringing out further gains resulting from the high powered incentive and control mechanisms which can be bought to bear in privately owned and publicly traded companies. The second pressure on SOEs is towards being pulled back into the public sector where social and political objectives can be more readily be meet. What we saw under the Clark government was the second of these pressures being very strong. But not for socially useful reasons. Most interventions seem to be more politically motivated.
These pressures would also be there for a mixed ownership firms and help explain why they don't do as well as fully privately owned firms. For example, Aidan Vinning and Anthony Boardman in "Ownership and Performance in Competitive Environments: A Comparison of the Performance of Private, Mixed, and State-Owned Enterprises", Journal of Law and Economics vol. XXXII (April 1989) conclude 'The results provide evidence that after controlling for a wide variety of factors, large industrial MEs [mixed enterprises] and SOEs perform substantially worse than similar PCs [private corporations].' The basic problem is that partial government ownership politicises the firm. We just have to hope we don't see a move in this direction in New Zealand.