There's been a lot of talk about how the proposed bank bailout is somehow socialist. Senator Jim Bunning recently said that the bailout is "financial socialism," as well as just being plain old "un-American." Congressman Ron Paul has made similar statements, and some of the bloggers here at BloggingStocks have joined in the chorus as well (here and here).

Now, I understand that the bailout violates the much loved principles of 'free markets' and 'democratic capitalism', but we can't let this violation muddy the meaning and history of different economic forms. In the long history of capitalism, socialism has represented an alternative that fundamentally challenges the capitalist structure of political and economic power. This bailout does no such thing.

If the bailout were truly socialist, it would result in long-term state ownership of the banking industry. No such option is on the table. Even getting a minority, non-controlling interest in the banks in return for the massive public investment has been controversial and thus far impossible.

Socialism has a long and complicated and even contradictory history. But the basic principle is pretty clear: economic activity should benefit all citizens and not just a small upper class. Accordingly, in a socialist state, major industries should be publicly owned and wealth should be shared. There are plenty of examples of socialism in action, including the state-owned industries in much of Europe after World War Two, as well as the fairly weak political forms of the welfare state in the U.S., including the Social Security system.