A Case for Quasi-Libertarian Nationalization of Certain Banks

Four years ago, somewhere near the depths of the Great Recession, I proposed that Citibank and Bank of America be merged.  The concern driving that proposal was that the two had become too big to fail and, as such, continued to be a threat to the national economy.  The concept was that merger would facilitate elimination of some redundancies, spinning off of certain business units, and eventual narrowing of the combined banking entity into a size that would be more manageable during future financial crises.

It occurs to me that there may be another approach.  To discourage corporations from enlarging themselves and their risk portfolios beyond a socially safe size, it may be appropriate to institute a process whereby a public bailout necessarily entails public ownership.  That is, instead of a series of potentially costly and controversial ad hoc deals where the government becomes a shareholder or creditor in corporations that may then turn around and exploit the taxpayers who saved them, perhaps the law should require an irreversible governmental takeover of the bailed-out entity.

Nationalization tends to be an unpopular concept, in the U.S., at least partly because governments tend to have poor reputations and/or track records in managing competitive business entities.  That might not be the case if government were managed, staffed, and funded in ways compatible with competitive enterprise.  A potentially workable alternative would be to vest the public ownership in a sort of stock pool, through which each private citizen owns shares in the nationalized entity.  In other words, if there were 320 million Americans, and if the combined net worth of all nationalized entities amounted to $320 billion, then each American would own $1,000 worth of stock in the pool.

The title of this post refers to this as a “quasi-libertarian” sort of nationalization, in contrast to a socialist nationalization where it would be the government, not the citizens, who had actual ownership.  In this proposed quasi-libertarian nationalization, citizens would exercise the powers of stockholders, essentially voting on the management of huge economic units just as they vote on the management of huge governmental units (e.g., President, Congress).  Most likely, many citizens would decide to grant proxy voting rights to board members or others whose views tend to coincide with their own.

Allocation of stock ownership might best be revised annually on the basis of population and the worth of the pool.  To continue the previous example, if the nationalized entities proved successful (or if it became necessary to bail out still more corporations), such that the pool’s net worth doubled to $640 billion, then every American would own $2,000 worth of pool stock.  Similarly, if the U.S. gradually got control of itself and halved its population to 160 million, then that $640 billion pool would mean that each citizen would hold $4,000 worth of pool stock.  It could thus develop that the stock pool would someday encourage responsible attitudes toward reproduction and the granting of citizenship rights.

These suggestions imply that stock ownership would be inalienable — that, in other words, people would not be able to buy or sell shares in the pool.  This feature seems advisable for a few reasons.  One is based on observation of nationalization in the former Soviet Union, where shrewd and/or unscrupulous people were able to snap up valuable shares on the cheap, from poorly informed citizens who did not understand what they were giving away.  Another arises from a general sense that there is value in an egalitarian understanding that every citizen is entitled to an equal amount of ownership in nationalized economic entities.

This post appears in this leisure blog because it provides a partial (eventually, perhaps, a full) answer to the question of what we are to do if, as suggested in another post, it becomes advisable or unavoidable to adapt ourselves to a world in which robotics and other developments leave us with far too few jobs to go around (as is already the case on the level of employment globally).  The answer to that problem is that the proposed stock pool, with central management but nationally distributed ownership, could someday grow in size, to such a point that it would become a key part of a social safety net for those without adequate employment income.

Plainly, a stock pool worth $2,000, or even $20,000, would not begin to generate sufficient dividends to pay for an individual’s living expenses.  What is proposed here is merely the initiation of the pool; its growth to the level of the social safety net would require substantial additional measures.  That is not to say that such measures are unimaginable.  To the contrary, it may develop that there are many asset sources that might appropriately be added to the pool.  For instance, there have evidently been many instances in which corrupt governmental bureaucrats have leased federal lands to mineral extraction (e.g., oil, gas, coal) corporations for a fraction of their actual value.  The leasing of such lands would likely have unfolded in a much more transparent and remunerative manner if the outcomes of the process had had direct financial relevance to the entire population.  In other words, private corporate executives are not necessarily the only players whose powers may be trimmed, for the public fiscal benefit, in the event of malfeasance or incompetent administration.  A population interested in creating its own safety net might eventually identify enough mismanaged public assets to provide some protection for those who find extended leisure preferable or unavoidable.

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