Strikes against the use of foreign workers in the UK; French carmakers told to buy domestic components and not close factories in France; a minister in Spain urging consumers to buy Spanish; "Buy American" provisions in the Federal economic stimulus bill mooted by the Obama Administration: protectionism in Europe and America seems to be rearing its ugly head. Has the much-vaunted free-market capitalist system been pressurized to submit to a nationalist, and in all likelihood, populist agenda?

The current scenario was the result of rising political pressures in advanced countries as they take a direct hit from the global recession. The plunge in international trade and exports resulted in many plants' closure and massive job losses as their economies tanked.



The various governments' injection of state funds into their banking systems have put many of the countries' banks into government hands. That in turn, is piling up the political pressure for bailouts of other industries.



Most observers have dubbed such mega bank bailouts as "financial protectionism". Financial protectionism is leading to national support for other industries, as European governments realize they have to help more than just the banks.



For example, in France, the government is urging carmakers not to transfer jobs or production outside France in return for six billion Euros in aid. Even the once staunch free-market Swedish have come up with rescue packages focused on national priorities, with loans and guarantees contingent on money being spent in Sweden.



Could countries, in their zeal to stave off the financial collapse of their economies be inadvertently hastening their demise -in dislocating them from the global free-market ecosystem that fuelled their ascendancy in the first place? Could this economic salve turn out to be a poisoned chalice?



To quote Nicolas Veron of the Bruegel think-tank in Brussels, "We will see more and more activist government policies that distinguish economic activities according to the nationality of the actors. It should be a big concern to everybody."



The recipients of the bailout money, or financial protectorates, as we may refer to them, have also to adhere to somewhat draconian government terms for emergency assistance, such as salary caps and proscriptions on corporate aviation privileges as well as other corporate accoutrements.  

So does this signal the triumph of state legislation over free-market precepts as the primary arbiter of corporate decision-making? Already the proposed salary caps are sending out ripples of resentment among the very constituents they were supposed to govern.

A recent article on executive compensation published on Forbes.com on February 4,  infers that imposing the most austere compensation caps on recipients of TARP (Troubled Asset Rescue Program) , will surely deter the most capable executives from  managing America's corporate dregs. This will no doubt result in a negative backlash against reforms which are ostensibly designed to improve the system.



In pondering this, I am reminded of a term used by Vladimir Lenin, who used the phrase "commanding heights" to describe the strategically important segments and industries, such as oil, banking, railroads and steel that serve as bulwarks to support the overall economy.



Lenin believed that communitarian ownership of such assets, through the Government conduit, would ensure the most equitable distribution of land and resources to the people. Could the current inexorable drive to curb the excesses of the capitalist economy ultimately lead to the rebirth of Marxist ideologies, albeit ensconced in the veneer of state protection?



Will the banking system emerge as the modern day "commanding heights"? Probably not, only time will tell. However, we can expect an unprecedented degree of government influence, on the premise of righting the wrongs of an "unfettered capitalist system".  



So what do we make of this current permutation of Marxism? The Iron Curtain it certainly is not, but perhaps a more appropriate title is that of "The Translucent Drape. We may be able to only vaguely discern the workings and intricacies of this new system, without completely fathoming it, but we will have to believe that it will ultimately benefit society as a whole.