What is "lemon socialism"

n. The practice in otherwise free market capitalist economies in which the government steps in to bailout or otherwise subsidize weak or failing firms. A government attempting to transition from capitalism to socialism by this method takes control of the worst industries — the "lemons" — first, which undermines such an approach.

Lemon socialism is a pejorative term for a form of government intervention in which government subsidies go to weak or failing firms, often with the intent of preventing further, systemic damage to what might otherwise be considered a free marketplace. These subsidies can even take the form of a full or partial bail-out, as happened during the 2008 financial crisis. The pejorative comes from the perception among free-market economists that failing companies are defective lemons that a working free market would replace with better-functioning companies in response to market demand, and the public-sector involvement this type of state intervention shares with socialism.

Confusingly, lemon socialism may also refer to government efforts to transition from capitalism to actual socialism; in this case it refers to a deliberate strategy of absorbing the losses entailed in saving jobs within the worst-performing sectors of the economy — the lemons — before the nationalization of more profitable industries.