Lemon socialism is a pejorative term for a form of government intervention in which government

subsidies A subsidy or government incentive is a form of financial aid or support extended to an economic sector (business, or individual) generally with the aim of promoting economic and social policy. Although commonly extended from the government, the ter ...

go to weak or failing firms (''lemons''; see Lemon law), with the effective result that the

government A government is the system or group of people governing an organized community, generally a state. In the case of its broad associative definition, government normally consists of legislature, executive, and judiciary. Government is ...

(and thus the

taxpayer A taxpayer is a person or organization (such as a company) subject to pay a tax. Modern taxpayers may have an identification number, a reference number issued by a government to citizens or firms. The term "taxpayer" generally characterizes o ...

) absorbs part or all of the recipient's losses. The term derives from the conception that in

socialism Socialism is a left-wing Economic ideology, economic philosophy and Political movement, movement encompassing a range of economic systems characterized by the dominance of social ownership of the means of production as opposed to Private prop ...

the government may nationalize a company in its entirety, while in lemon socialism the company is allowed to keep its profits but its losses are shifted to the taxpayer. Such payments may be made with the intent of preventing further, systemic damage to what might otherwise be considered a free marketplace. For example, the

bailout A bailout is the provision of financial help to a corporation or country which otherwise would be on the brink of bankruptcy. A bailout differs from the term ''bail-in'' (coined in 2010) under which the bondholders or depositors of global sys ...

that followed the 2008 financial crisis may be described as lemon socialism. The pejorative arises from the belief among

free market In economics, a free market is an economic system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of government or any ot ...

economists that in a functional free market, failing companies would be replaced by better functioning companies in response to market demand. The term may also be used to describe government efforts to

nationalize Nationalization (nationalisation in British English) is the process of transforming privately-owned assets into public assets by bringing them under the public ownership of a national government or state. Nationalization usually refers to pri ...

companies or industries, in which the government takes over failing companies without taking over healthy companies. ("Critics fear that a rush to public ownership may bring a form of 'lemon socialism'—where the government, as in England, takes over failing companies, but not healthy ones.") Advocates of free markets may then point to the faltering, nationalized enterprises as examples of how government regulation hurts business.

Origin

Mark J. Green Mark Joseph Green (born March 15, 1945) is an American author, former public official, public interest lawyer, and Democratic politician from New York City. Green was New York City Consumer Affairs Commissioner from 1990 to 1993 and New York Ci ...

coined the exact phrase in a 1974 article discussing the

utility company A public utility company (usually just utility) is an organization that maintains the infrastructure for a public service (often also providing a service using that infrastructure). Public utilities are subject to forms of public control and r ...

Con Ed. The sentiment was earlier expressed in the adage "

socialism for the rich and capitalism for the poor Socialism for the rich and capitalism for the poor is a classical political-economic argument asserting that, in advanced capitalist societies, state policies assure that more resources flow to the rich than to the poor, for example in the form ...

", which was in use by the 1960s, though the notion of privatizing profits and socializing losses dates at least to 1834 and

Andrew Jackson Andrew Jackson (March 15, 1767 – June 8, 1845) was an American lawyer, planter, general, and statesman who served as the seventh president of the United States from 1829 to 1837. Before being elected to the presidency, he gained fame as ...

's closing of the

Second Bank of the United States The Second Bank of the United States was the second federally authorized Hamiltonian national bank in the United States. Located in Philadelphia, Pennsylvania, the bank was chartered from February 1816 to January 1836.. The Bank's formal name, ...

. Joseph Stiglitz used the term ''ersatz capitalism'' to describe a similar approach by

Barack Obama Barack Hussein Obama II ( ; born August 4, 1961) is an American politician who served as the 44th president of the United States from 2009 to 2017. A member of the Democratic Party, Obama was the first African-American president of the ...

Other languages

In Icelandic, lemon socialism is known as ''Sósíalismi andskotans'', meaning "the devil's socialism", a term coined by Vilmundur Jónsson (1889–1971, Iceland's Surgeon General) in the 1930s to criticize alleged

crony capitalism Crony capitalism, sometimes called cronyism, is an economic system in which businesses thrive not as a result of free enterprise, but rather as a return on money amassed through collusion between a business class and the political class. This i ...

Landsbanki Landsbanki (literally "national bank"), also commonly known as Landsbankinn (literally "the national bank") which is now the name of the current rebuilt bank (here called "New Landsbanki"), was one of the largest Icelandic commercial banks that f ...

, which has gained renewed currency in the debate over the 2008–2012 Icelandic financial crisis. Lemon socialism, or more precisely crony capitalism, is also referred to as Pilsfaldakapítalismi, meaning "skirt capitalism", ''pilsfaldur'' being the hemline of the skirt; and the term referring to children hiding behind their mothers' skirts after having done something wrong to criticize the alleged lack of transparency in dealings and reluctance to deal with bad consequences by themselves.

References

{{reflist Capitalism Socialism Metaphors referring to food and drink Political corruption Subsidies Political slurs

Origin

Other languages

See also

References