This is a rush transcript from "Glenn Beck," May 27, 2009. This copy may not be in its final form and may be updated.

GLENN BECK, HOST: I asked our guest at the beginning of the program tonight if we are still a capitalist nation. Thomas Sowell is a senior fellow at Stanford's Hoover Institute, author of "The Housing Boom and Bust," which we are next week doing a special on this book. We had him break down the whole housing crisis for you. It is kind of a companion for this book, which if you want to understand how we got here, this is the best book that you can possibly read. It is so simple. It is so clear. There are no sacred cows. It takes on everybody. It's fantastic.

Thomas, welcome back to the program, sir.


BECK: So let me start with that question — are we are still a capitalist country?

SOWELL: Oh, heavens. Partially.

We're not a socialist country, because the socialists believe in government ownership in the means of production, but the fascists believe that the government should have private ownership and the politicians should tell people how to run the businesses. So that's the route we seem to be going.

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BECK: So what route is that again?

SOWELL: The private people still own the businesses but the politicians tell them what to do.

BECK: Right, but isn't that — I'm trying to remember, that's —

SOWELL: That's fascism.

BECK: Yes, I was going to say, I knew it was a bad one. And I was going to say, I think that's fascism. Yeah. OK. Well you're a crazy lunatic. Why would you say we're going down a fascist road?

SOWELL: Only because we are.


BECK: OK. There you have it, America.

Thomas, I said two years ago, I said look, they're going to go for the car companies and the airlines and for the energy industry. They're going to go for the financial industry. There was like four of them that I lined up, and I said we're going down this fascist road. Nobody will — why won't anyone pay attention even now?

Why is America still — they see it. They know it. They feel it in their gut, but yet nothing is really — I don't know. I don't know why people aren't marching in front of the Capitol or surrounding the Capitol with their lawn chairs and just saying you ain't leaving until you change all this nonsense. What's it going to take?

SOWELL: Well to do that, they would have to sink. And this whole personality cult has caught on in such a way that it is going to be a while before people start thinking. It is a question of how big of a calamity is it going to take before they snap out of it.

BECK: How big of a calamity is coming our way?

SOWELL: Gosh, I hate to make predictions, but I think the economy is going to be permanently changed for the worse. I think our foreign policy is going to lead to changes that will be definitely for the worse, particularly if we drift into a nuclear Iran, which I gather that's what the administration is doing.

The courts, my God, the whole idea of equal justice under law is completely incompatible with the idea of judges deciding cases according to "empathy."

BECK: I tell you, this empathy thing, again, as I said at the beginning of the show, that's what is leading us to these bailouts. Everybody says well I don't want people to lose their jobs, I don't want people to fail. Well, empathy is causing us to make very bad decisions right now.


BECK: You need to be empathetic in your own personal life and we help our neighbors and our friends out who are struggling in our neighborhoods. But we don't make bad decisions based on empathy, and I can't believe that this is where the United States government is taking our court system now, to empathy.

SOWELL: One of my favorite statements by Justice Oliver Wendell Holmes was in a letter he said, "I loathe most of the people that I decided in favor of." So he was the opposite pole from the empathy thing.

BECK: You know, the system that we're working on right now, it seems like we are enabling people. I'm a recovering alcoholic, so I know enablers. We're enabling people to live and produce mediocre or even worse and get away with it, and we're also teaching the big guys how to game the system. Would you say that's accurate?

SOWELL: Absolutely. Someone asked the question, why should someone continue paying his mortgage when his neighbor who doesn't pay his mortgage gets bailed out by the government?

BECK: And the big guys are only learning how to game. They are only learning, wait a minute, hang on just a second, if I'm big enough, I can grab all of this stuff and the government will give me a free ride.

SOWELL: Well Fannie Mae and Freddie Mac were classic examples of that. They were way out there on a limb buying all these mortgages that had great potential for default, but they knew that the taxpayers were there to back them up.

BECK: OK, Thomas Sowell, we're going to back with you in a second. And when we come back, I have to share something that we found in the yearbook of our new judicial nominee. I mean, when are we are going to pay attention to this stuff? Show me your friends and I'll show you your future. We'll do that next.


BECK: We're back with Thomas Sowell. He is a senior fellow at the Hoover Institute and also the author of a great book "The Housing Boom and Bust." You want to know who is responsible? This book shows it to you, and I mean in great, great detail.

Thomas, I have to tell you, I have been trying to figure this out for a very long time. It took me a long time to figure out exactly all the ins and outs. I think you have captured it in this book. You've made it really easy to digest and understand. I don't think you missed anything. I just think it was great. You call them as you see them. I think it's great.

SOWELL: Thank you.

BECK: Do you believe in the old adage, where there's smoke, there's fire, or show me your friends and I'll show you your future?

SOWELL: A lot to be said for that. Birds of a feather flock together, et cetera.

BECK: That's an interesting one, too. We have something now — do we have the page from the Supreme Court justice nominee — Sotomayor. This is a page from her yearbook. She was — this is her senior year at Princeton University, which, if I'm not mistaken, Professor Sowell, a degree at Princeton University, that is a governmental school. That is to go to really how to be a part of government, isn't it one of the best ones for that in the country, right?

SOWELL: Well, I hear that.

BECK: Yes, I mean, you're not a dummy if you come out of there on what things mean.

Well in this yearbook, she writes her favorite quote is: "I am not a champion of a lost cause, but of causes not yet won." That came from Norman Thomas.

Norman Thomas was the socialist candidate for president of the United States during FDR's term. He is the guy right there at the end of FDR when he was like, I don't have to run anymore because we've got FDR, he's doing it all.

But he also said — Thomas — this, that: "The American people will not knowingly adopt socialism, but under the name of liberalism, they will adopt every fragment of the socialist program until one day America will be a socialist nation without ever knowing how it happened."

Are we are there yet?

SOWELL: No, but we're on our way. We're well on our way. I think that's revealing. Now in this the case of this particular judge, I think her own actions are such that we don't have to look to her friends to tell us what she is all about. I mean, the firefighters' case in Connecticut was a classic.

BECK: Do you think that was racist? I said yesterday that I thought she was a racist and I got heat for it.

SOWELL: Well, the truth does that to people.

BECK: I love you.

SOWELL: You know, this whole notion that a Latino female can give a better view of things than a white male. Well, what if a white male has said that a white male can give a better view of things than a Latino female? The world would be up in arms.

BECK: Oh, my gosh! You know who needs to fix this whole financial thing. If we could just get some Jews in here to fix it because they know about money. There would be people setting people on fire for saying that. How did we get to — you know what it is? We have gotten to a place in our society that if you're in the right group or you're in the group with the powerful opinion, you can get away with saying anything which again embraces...

SOWELL: Oh absolutely.

BECK: It embraces mediocrity, doesn't it? It creates mediocrity because you're never challenged.

SOWELL: That's true, but mediocrity is the least of it. I mean, really, racism does not have a good track record. It has been tried out a long time. And you would think by now we would want to put an end to it instead of putting it under new management.

BECK: Yes, all right, Thomas, we thank you so much. And we will see you again next week. Again, if you want to understand how we got here, his book will do it. And we are going to tear it apart all next week and he will walk us through the book all next week on this program. So don't miss it.

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