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.