French President  Nicolas Sarkozy has a plan: Let’s have the governments of the world increase their regulation of the banking sector, and let’s have those same governments renationalize many of their counties industries, and then let’s call it “capitalism.”  This is the message that Sarkozy conveyed at a recent meeting with President George W. Bush at Camp David, and in a speech he delivered at the European Parliament this past week.

At their meeting at Camp David in Maryland, Presidents Bush and Sarkozy agreed that there should be a series of international conferences that bring together the major developed and developing nations of the world to redesign the international financial order.  The White House has set November 15 as the date for representatives from 20 leading nations to attend the first of these meetings in the United States.

Sarkozy replied that in his view it is the free market that has caused the current global economic crisis. “We cannot continue along the same lines . . . This sort of capitalism is a betrayal of the sort of capitalism we believe in.”

A few days later, at the European Parliament, Sarkozy explained just what type of “capitalism” he wants.  He wants to see the government bailout and subsidize the European automobile and related industries – just as the U.S. government is doing for the American automotive industry, Sarkozy says. He wants the European governments to establish their own Sovereign Wealth Funds to buy sizeable equity in “vital” sectors of the European economy, to prevent any foreign  Sovereign Wealth Funds (read: Arab countries and Russia) from acquiring control of them – along the model of the U.S.  government buying equity shares in American banks, the French president suggested.

Sarkozy declared, “We can’t be naïve, we must product our industry.” He insisted that, "I will not be the French president who wakes up in six months time to see that French industrial groups have passed into other hands." Rather, "The moment has come to give the state the instruments it needs to intervene directly in the economy when it considers that strategic interests of the nation are threatened." Thus, the ghosts of protectionism past are offered by Sarkozy as part of the answer to today’s problems.

In addition, the French and German governments are calling for the new international financial order to set a cap on corporate executive pay, worldwide. They want tax havens like Switzerland to be put on a blacklist and penalized through regulatory and fiscal methods for providing Europeans a place to guard their hard earned income from the grasping hand of their respective governments. The goal is to end “tax competition” among countries that can cause capital flight if any particular government noticeably raises tax rates above its political neighbors’ fiscal levels.

Sarkozy proposed the establishment of a European-wide “economic government” that would regulate and control the flow of capital through restrictions on hedge funds and other forms of financial intermediation and speculation, including short-selling.  British Prime Minister Gordon Brown has said that the top 30 banks in the world should be regulated by a global agency such as the International Monetary Fund to see that they do not invest in “excessively” risky enterprises.

The French, in particular, dream of a “new world order” in which America follows the lead of its more interventionist and regulatory international trading partners, and gives up whatever greater degree of market freedom that remains in the American economy.

This is the “new capitalism” that the French and other Europeans offer to a troubled and fearful world at this time of global economic crisis.

Of course, what they want is not capitalism at all, regardless of the rhetoric they may choose to use. What they want more of is a state-controlled, managed and dominated economic system.  It went by many names in the 20th century: socialism, fascism, the regulated economy. What they all added up to was political direction of the economic affairs of the citizenry.

At the beginning of the 20th century, the proponents of greater government involvement in economic affairs played a very successful linguistic trick. They transformed the meaning of liberalism, which historically had meant a political philosophy of individual freedom, limited government, and free markets. Liberalism now came to mean government regulation of business, political redistribution of wealth, and expansive government involvement in social affairs through high taxes and big spending.

A progressive and modern liberal, they said, is suspicious of individual initiative and unbridled market forces. The new liberal sees the government as a wise, paternalistic power in society not bound by out-of-date and dusty constitutional documents. Instead, government should pragmatically intervene in the market on a case-by-case basis.  Day-by-day political expediency, not abstract philosophical principles about peoples’ inalienable rights, should guide good government in setting economic policy.

The end result of this conception of government is the crisis through which we are currently passing. Governments regulate virtually every corner of the society. Stop and ask yourself where does there exist even one significant aspect of production, employment, investment and consumption in which the state does not take an intrusive hand to one degree or another? The answer is: no place. Neither America nor the rest of the world have had the much maligned policy of “laissez-faire” for many, many decades.

Now when the regulatory and monetary policies of those very governments have brought about the current economic crisis, what do they say? “It is capitalism that has failed.” “Once again it has been shown that unfettered capitalism leads to disaster.” “Only government intervention can now correct the chaos of free market capitalism.”

The same politicians, bureaucrats and central bankers whose “pro-active” interventions and monetary expansion created the housing and investment bubbles, now claim they are the ones to “solve” the imbalances and distortions they blame on the market.

But rather than call a spade-a-spade and just say that what they want to replace the remaining market order with is socialism and heavy-handed government regulation, they want to co-opt the meaning of capitalism.

Capitalism means a social system of free individuals who interact and trade with each other on the basis of voluntary and mutually agreed terms of exchange. It is a system in which violence, theft and fraud are both immoral and illegal.  Private property is secure and protected by the government that is meant to guard people against the aggression and plunder of others.

Individuals make their own consumption choices and production decisions guided by market-based prices that are formed out of the competitive forces of supply and demand. Businessmen search out profits and attempt to avoid losses. And any profits earned are the result of successfully anticipating and satisfying the wants of the consuming public better than their supply-side rivals.

The opposite of capitalism is a political system in which government lords over the population through coercive regulations, commands and prohibitions. The government respects neither the freedom of the citizenry nor their honestly acquired property.

Instead, the government claims the right and responsibility to tell people how to live their lives, and how they may use their minds and their material possessions. The government taxes the public to recreate the social order according to the fads and fancies of those in political office and the special interest groups that provide the votes and campaign contributions that secure politicians’ election victories.

It is a political system that through most of the 19th and 20th centuries was understood to mean economic collectivism. If peoples’ property was forcibly seized and nationalized by the state, it was called socialism or communism. If people’s property was not formally nationalized, but placed completely under the order and command of government planning, it was called fascism or National Socialism. If the government did not completely do away with private, decentralized market decision-making but burdened it with extensive regulations and controls over the setting of prices and the direction and form of production, it was called the interventionist state.

But regardless of the particular form of economic collectivism, it was clearly understood that it meant the end of capitalism. It was not some new or improved or “socially responsible” capitalism. It was the abolition of economic freedom.

In the coming months, politicians and their bureaucratic representatives will argue in many forums, including these planned international conferences to reconstruct the global financial order, that they are not destroying capitalism, but merely saving it through wise and reasonable regulations.

We should not allow ourselves to be fooled or permit these governments to pull another linguistic fast one.  The vision offered by political leaders such as Nicolas Sarkozy is not a new capitalism, but just another version of the worn out and defunct systems of socialism, fascism, and the interventionist state.

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