The word “nationalize” has at least one great use, in the punchline of a hilarious Winston Churchill story.
But in the current media firestorm over bank nationalization, maybe it’s time to abolish the word as harmful to thought. (David Paul seems to agree.)
I’ve used the term myself and like the idea of the government temporarily seizing control of the big zombie banks, but “nationalization” has been bandied about so loosely that it’s lost its meaning. Many people described the Bush-Paulson capital injections (via purchases of preferred stock that gave the government small nonvoting stakes in some banks) as nationalization, when they were really just crude subsidies (as Willem Buiter pointed out). And if it’s nationalization for the government to temporarily take over a failing bank so as to help depositors and creditors, avoid systemic risk and arrange for the orderly sale of its assets, then we’ve been doing it for over 75 years, ever since the creation of the FDIC. In fact, by some compelling accounts, Sheila Bair’s FDIC has been the one shining light in this crisis.