Community | September 22, 2011 | 16 comments

When Socialism Saves Capitalism

source: http://www.truth-out.org/when-socialism-saves-captialism/1316698212

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WakeUpPeople
Have you noticed that one of the Obama administration's most successful programs is also its most "socialist" initiative?

OK, the bailout of General Motors and Chrysler was not socialist in the classic sense: the government was not looking to hold onto the companies over the long run. Their turnaround was accomplished in significant part by tough, capitalist management steps.

But, yes, this was socialism -- or, perhaps, "state capitalism" -- because the government temporarily took substantial ownership in the companies when no one in the private sector was willing to put up enough capital to prevent them from going under. Today, the companies are thriving.

More than that: the auto industry exemplifies how unions can do their best to protect the interests of their members while also ensuring the prosperity of the companies that employ them.

This month, the United Auto Workers and GM reached a tentative four-year contract that will add or save some 6,500 jobs, provide workers with a $5,000 signing bonus and enhance a profit-sharing agreement.

Note that increase in profit-sharing. The union and the company are seeking to align the interests of workers and shareholders. The idea should be as American as a Chevy or a Ford: When a company does well, its employees should do well, too.

The UAW's bargaining approach belies the notion that unions don't care about the well-being of the companies whose workers they represent. On the contrary, the UAW made extraordinary concessions to keep the Detroit-based auto industry alive. Now, its members can fairly claim a right to some of the benefits.

"When GM was struggling, our members shared in the sacrifice," said Bob King, the UAW president. "Now that the company is posting profits again, our members want to share in the success."

Anybody have a problem with that?

And the bailed-out companies have come back, as Dick Cheney might say, big time. In August, GM announced that its second-quarter profits had nearly doubled, to $2.5 billion. To put that in context, in April 2010, GM reported losses of $4.3 billion. Revenue at GM rose 19 percent, to $39.4 billion.

In a sluggish economy, the auto industry is providing us with good news. And this good news was brought to you in part by the government of the United States of America, paid for by taxpayers just like you and me.

We taxpayers will reap rewards, too. A lot of money put into the companies will be earned back by the government, but there's more: Employed workers will pay taxes (and not need unemployment compensation). The auto industry's large network of suppliers will stay in business. Everybody involved will be able to buy goods and services that will put other people to work.

The larger lesson is that there are two ways to approach the problems capitalism inevitably runs into. One is to pretend that there are iron rules prohibiting us from doing anything at all. We are supposed to have faith that an invisible hand will eventually put matters right; in the meantime, we must accept any slap in the face the invisible hand might deliver.

Franklin Roosevelt described the other way in 1932: "Our Republican leaders tell us economic laws -- sacred, inviolable, unchangeable -- cause panics which no one could prevent. But while they prate of economic laws, men and women are starving. We must lay hold of the fact that economic laws are not made by nature. They are made by human beings."

Once human beings throw off the chains imposed by the idea that all economic laws are "natural," they discover the capacity to change things and can use the tools of democratic government to do so when all else fails.

We did not have to accept the collapse of our domestic auto companies, and we do not have to accept that the Federal Reserve is powerless to give the economy the boost it needs. There is no reason to believe that the federal government is incapable of investing more in schools, roads and other public goods to build for the future and get more money into the hands of consumers now. We do not have to rely on giving rich people tax cuts and then confine ourselves to offering fervent prayers that they might invest some of the money in creating jobs.

We can seek to control our fate, or we can turn the Invisible Hand into a God who commands us to be helpless.
  1. groups:
    Community,   News and Politics,   Politics,   Progressive America,   4 more
  2. tags:
    Capitalism,  Socialism,  Auto Industry
  3. recommended by:
    WakeUpPeople
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16 comments // When Socialism Saves Capitalism

  • JohnA
  • WakeUpPeople
  • JohnA
    • 0
      JohnA  
    • WakeUpPeople:

      The point of the article seemed to be that government was neccesary to have a successful company, with the auto companies as example. Ford did not require government intervention to remain a force in the automobile industry. So that point is not valid. With Ford as example, government is not needed to be a successful company.

    • 8 months ago
  • WakeUpPeople
    • 0
      WakeUpPeople  
    • JohnA:

      I don't think that was the intent of the article. The point was that when these major companies required assistance for survival, the govt brought them back from the brink and saved countless jobs. The debt has been repaid and the companies have actually become quite profitable again, so all in all, it was a successful investment. Ford was not in the same dire straits as the others, and I commend them for their ability to weather the storm, but if we had lost the others, it would have been a disaster.

    • 8 months ago
  • JohnA
    • 0
      JohnA  
    • WakeUpPeople:

      The debt has been repaid? GM and Chrysler both filed Chapter 11, the both got huge tax breaks in the billions of dollars at the taxpayers expense, GM especially, they got a 45 billion dollar tax break at the taxpayers expense, after they filed bankruptcy and screwed over all their bond holders. No debt has been repaid. Except on which ever of the government's set of books they show you that day. I live in the South, Toyota and Nissan and the foriegn car manufacturers that employ workers in the south did not get a government bailout, and they employ hundreds of thousands of American workers. Oh yeah, workers in the south aren't Union workers so they don't count. Debt has been repayed? Bullshit, a pittance to salve the government's set of books at the moment. To big to fail is a crock, if you can't cut it, you deserve to fail.

    • 8 months ago
  • WakeUpPeople
  • JohnA
    • 0
      JohnA  
    • WakeUpPeople:

      Repaid with interest if you believe the government's numbers about what's been paid out from where. Here's a tip, they lie, a lot. Government Motors and Chrysler have cost the taxpayers billions of dollars and for what? A free handout to the UAW so they will keep voting Democrat. A royal screwing of the taxpayers and the GM debt holders in favor of the UAW at the hands of this administration. They should have let them fail to start with instead of giving them government money and then having them filing bankrupcy. And Obama illegally gave them TARP money meant specifically for financial institutions in the first place. The skirted or just ignored the Constitution, the TARP laws, the bankruptcy laws especially, and for what. So the precious Unions could keep their benefits you and I don't get. Those other companies may not be squeaky clean, but they have not so obscenely screwed over the taxpayers in such an astonishing blatent manner.

    • 8 months ago
  • WakeUpPeople
    • -1
      WakeUpPeople  
    • JohnA:

      To be perfectly honest, I was not happy with the bailout at the time, but I recognized the disastrous consequences if they were allowed to fail. It was a catch 22 but I think the best choice was made. I doubt your theory that the govt assisted them only for the sake of unions. That is far fetched. Remember that the CEOs came to Washington begging for help, not the labor unions. I can't force you to believe GM or the govt on the loan repayment, but that is at least the official story. There was nothing illegal about the TARP money going to them. The wording in the law was vague enough so as not to specifically exclude the auto industry. “...established and regulated under the laws of the United States or any State, territory, or possession of the United States…and having significant operations in the United States.” Even the Bush administration argued that the industry qualified for TARP funds.

    • 8 months ago
  • JohnA
    • 0
      JohnA  
    • WakeUpPeople:

      They did fail! They filed Chapter 11 bankruptcy! After we gave them bailout money. The bankruptcy laws in this country are very specific as to who gets paid in what order, and they were ignored. The bond holders, who are supposed to be the first to get paid, got nothing. The Unions, who are supposed to be among the last to get paid, got part ownership of the companies. The TARP law was for financial institutions and financial institutions only. Only when it was clear the Congress would not vote to bailout GM and Chrysler, a Democratic majority Congress by the way, did Obama use money allocated for the TARP to bail them out in an end around by the Congress. It was a complete setup. There would not have been any more disasterous consquences than there were, if there is a void in the free market, someone will step up to fill that void, without government interference. If there is a demand, someone will meet that demand. Government is not needed. Too big to fail is a crock of shit. If you can't cut it, you should fail.

    • 8 months ago
  • GRC54
    • -1
      GRC54  

    • Without governments help we all suffer. I have no problem with government helping out a business but when that business just takes the money and holds on to it for their own gains, (note to Wall Street and all the financial institutions}, then any help for business that doesn't make using the money to build their business and hire employees then give the money back to the government with interest as the auto makers did should be broken up and the government takes back their money with interest for the common good of all.
      If this is Socialism then Predatory Capitalist should change their ways of face the full wrath of the government for the good of the people it serves.

    • 8 months ago
  • SIBob
    • +1
      SIBob  
    • Image

    • Socialism is okay for the rich or the corporations, for the rest of us peasants its gruel and Adam Smith. When corporations need help it is a subsidy or a necessary tax break, when we need it, it becomes an entitlement or a handout. When corporations collude against unions, (in effect forming a “union” of their own, a socialist instrument, as happened in 1987-89 in the New York City Tugboat strike, that hired permanent replacement workers), it goes unpunished. When the American Railway Union backs a boycott against the Pullman Company and for its striking workers in1894, anti-trust laws are used against the union, and the leaders are thrown in jail. When Bush and Obama bail the banks out, it is called recovery, when the rest of us call for a government employment bill, it is called wasteful spending. When the sick are cut off from Medicare, it will be called a necessary budgetary readjustment. Who’s kidding who here? I know, the joke is on us. http://sibob.org/wordpress/

    • 8 months ago
  • jubal
    • +1
      jubal  

    • We need to fight for the end of predatory capitalism. That is at the heart of the struggle with banks and the wall street protests. Predatory capitalists are destroying the US.

    • 8 months ago
  • kennymotown
  • WakeUpPeople
  • kennymotown
  • kennymotown
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