Sunday, March 29, 2009

Is Obama’s Restructuring of GM and Chrysler a Step Toward Socialism?

On Sunday night, the Associated Press reported that Rick Wagoner, Chairman of the Board and Chief Executive Officer of General Motors, will step down from his corporate posts immediately, at the request of President Obama. On Monday, the White House will unveil a plan to restructure both General Motors and Chrysler LLC, in exchange for further government assistance to the auto industry; Wagoner’s departure is a condition for this help.

Here is the federal government dictating personnel decisions at the top of the corporate organizational chart, and laying out terms for the restructuring of corporations whose stock is publicly traded. Surely it would be justifiable to ask, is this action by President Obama a step to move the United States towards socialism?

And the answer would be: No.

“Socialism” is an umbrella term for various social and economic theories that have in common the idea that the government should own the means of economic production, and bring about economic equality across the population (that is, absolute equality in terms of final results, not just in terms of equal economic opportunity). In some approaches to socialism, private property is permitted to individuals, and private corporations are permitted to exist, although the government has a strong hand in economic matters; in other approaches to socialism, private property is not permitted, and there are no private corporations. The distinction between ‘strong socialism’ and outright communism is sometimes difficult to find. For some thinkers, socialism and communism are essentially the same, with different terms being used in different places depending upon where one term or another is more socially acceptable.

President Obama’s approach is by no means socialist. It is a strong approach, to be sure, an interventionist approach—but these are difficult times that call for strong measures. Let’s review some essential facts.

For years, the American automobile industry has operated with its head in the sand as the world has changed around it. The industry made only token moves towards improving gasoline mileage, while at the same time it depended for profits on gas-guzzling SUVs. (Hey, I used to own one—great for use as substitute trucks, but gas-guzzlers nonetheless.) The scientific community long knew that oil prices would climb, and widely reported that projection years ago, but auto manufacturers ignored that during an era when the federal government regularly ignored or even suppressed scientific findings that it found inconvenient. Thus, it’s no surprise that as oil climbed to $4 a gallon, people stopped buying American cars. Now, in the New Depression where people don’t want to buy much of anything, even as oil has dropped, consumers aren’t running back to buy autos. For this and other reasons, American carmakers are hanging on by a thread. The AP article reports that GM and Chrysler have survived the New Depression so far on $17.4 billion in federal government aid, and have asked for $21.6 billion more.

In a situation like this, there are four possible approaches:
  1. The hard-line, “laissez-faire” capitalist approach: Let the carmakers twist in the wind. Both GM and Chrysler go bankrupt. Tens of thousands of workers are thrown out of work. America loses more manufacturing capacity. Stockholders lose the value of their stocks. The American economy drops that much further into the New Depression. Thank you, President Hoover.
  2. The soft-line “cheaty” capitalist approach: Just give these companies all the money they want, and let them do what they want with it. Billions of public dollars disappear without any oversight or accountability, and without really addressing the underlying problems. After a brief period of false hope, we are back at Square One again, and the game continues. Thank you, President Bush.
  3. The socialist approach: Nationalize the auto industry, and administer it directly by the federal government. Jobs are saved, but now we have a mixed economy, both capitalist and socialist. That would give a whole new meaning to the term “the American experiment”—but not a welcome one. Thank you, Karl Marx.
  4. The measured intervention approach: Assist the industry, but insist on strong federal oversight and direction, until the companies within this industry are capable of standing on their own again. Emphasize accountability and responsibility, at the same time saving jobs and strengthening the economy. Ultimately, a new style of American capitalism—call it “Capitalism 2.0,” or “Responsible Capitalism”—emerges to bring America to a stronger position among the nations of the world. Thank you, President Obama.

The political extremists for whom only two choices exist—laissez-faire capitalism and Stalinist socialism—will castigate President Obama for the actions he will take on Monday. This commentator thinks that President Obama is making the hard, fair, best choice among the available options. As far as we’re concerned, President Obama is On The Mark.


  1. I agree that the administration is not pursuing a socialist agenda: by definition, it is fascist. Not that it started in 2009; Eisenhower warned of the "military-industrial complex", and between the "Great Society" and the "Change We Can Believe In", all we have had is an echo of the lyrics from The Who: "Meet the New Boss, Same as the Old Boss." When our country was founded, "Responsible Capitalism" would have been a redundant phrase, which is why Ben Franklin, when asked what kind of government had been created, said "A Republic, if you can keep it." The failure is not the capitalist system, but of those too dishonest to admit that without trust and effort, it won't work. A government cannot ever be the source of the general welfare, because it cannot, by itself, create wealth or value. The proper role of government is to guard the value of the wealth created by its people against those who would subvert it by fraud. In a true capitalist world, a company that is so idiotic as to pay bonuses for losing vast amounts of money would quickly cease to exist. Our current mess is the result of politicians -- on both sides of the aisle -- padding their friends' pockets while allowing high-risk insurance and subprime mortgages to undermine the entire economy. The bailout is an abomination -- both the one put forth under the last administration as well as this one -- accountability? All we get is frosh rep Alan Grayson pouncing on the carcass of AIG to pay back unearned bonuses (a real feat of hypocritical blindness, considering most of Grayson's fortune [his net worth is 20th among all on the Hill, at ~$45 million] came from "settlements" on court cases against government contractors. If their gains were ill-gotten, what does that make his cut? The USAs only salvation will be by enough people having enough of those who have for so long fed off the American taxpayer, and done little or nothing to help the people who are earning their living. The proposed "Tea Parties" are not a Republican response, but an acknowledgment of what JFK said in his in inagural, "...the same revolutionary beliefs for which our forebears fought are still at issue around the globe—the belief that the rights of man come not from the generosity of the state, but from the hand of God. We dare not forget today that we are the heirs of that first revolution..." Let us hope that enough of us can grasp that.

  2. My anonymous friend,

    Thank you for your passionate concern for American democracy. In a comment that covers so much ground, of course there are areas where I agree with you, and areas where I do not. I do not agree that America is fascist, although I certainly agree that we have long suffered under those--based both in the corporate world and in government--who have colluded to defraud the public and enrich themselves. I am curious to know what you would have proposed instead of the bailouts. Please do continue to comment on what you read here. Best regards, --Mark

  3. I tend toward laissez-faire, I suppose. The auto industry has been disregarding the needs and desires of their customers in too many areas to count, and rather than pay the penalty and fold, like any other company, we bail them out. Rather than allowing them to pay the penalty for purchasing an unaffordable home, we bail out home"owners". Rather than encourage slow and steady growth, we have encouraged obscene spending via credit, and would now bail out the bankrupt. I realize a laissez-faire economy and political view is not kind, but I don't understand why we, the taxpayers, are being required to make up for everyone else's greed. AIG is too big to fail? Then break it up into pieces and restructure it from the ground up. GM is too big to fail? Why? No one wants their cars, and so we save them, only to keep producing cars that no one wants?

    We as Americans made too much money too quickly. We revelled in our credit, our affluence, and our greed, and now we're paying the penalty and learning frugality. What is so wrong with that?

  4. Jessica, Thank you very much for your detailed response.

    I do appreciate your point of view. I would point out that even restructuring AIG is a long distance from laissez-faire economics. So, what if we really went whole hog here? What if we did just keep governmental hands off everything, and let all of these bad boys fail?

    Been there, done that. This was the tack that President Herbert Hoover took in 1928-1929. Not only did the market tank and the banks fail, but about a quarter of the American workforce was thrown out of work. The result was the Great Depression, which went global pretty quickly. This, in turn, was a contributing factor to bringing Adolf Hitler to power, and we all know how that turned out.

    I think I'm on pretty solid ground when I say that we don't want to go that way again.

    The point of the bailouts is not to reward profligate living, greed, and all the bad things that many firms and individuals have been doing. The whole tenor of President Obama's speeches has been the opposite: as a nation, we need a new, and much more responsible, approach.

    Sure, one has the urge to punish the bad corporate executives who were the predatory lenders, the unresponsive automakers, and so forth, as well as the greedy little piggy consumers and people who bought WAY too much house for their income, etc. etc. However, there's a problem here. Letting all these enormous firms fail would have consequences that would go well beyond punishing these people. Let's consider:

    -- Massive numbers of people would be thrown out of work.

    -- Banks galore would fail, which would far outstretch the capacity of the government to restore money through the FDIC system.

    -- All those folks in places like China who have invested in US Treasure securties would pull their money out, leaving the government high and dry. Who's going to pick up the slack to, like, pay the Army?

    -- As it did in the Great Depression, the economic chaos in the US would spread throughout the world, destabilizing governments, and creating situations where the Man on the White Horse comes by, promising the population of Europistania that he will save them--if only they grant him absolute power.

    -- As happened during the Great Depression, significant numbers of people get turned off to capitalism, and instead turn onto alternative approaches, like Communism. However, this time around, even more extreme angles are available, including both religious and non-religious approaches that advocate Calling It All Off Now--through, say, doomsday viruses.

    (This is the "12 Monkeys" approach, and it's not just science fiction. As opposed to the 1920's, this technology is in reach of bright graduate students. And the ideologies are there. Take, for example, the Voluntary Human Extinction People, and mix them with the militancy of an Earth First!-er, and you'd have just the sort of group I mean.)

    And so it goes.

    In sum, we have to separate the idea of the bailouts from the notion of rewarding the guilty. Should we hunt down the guilty like rabid dogs and prosecute the living daylights out of them? Yep. Should we let the rest of the country and the world suffer by taking a hands-off approach to the economy? Nope.


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