When the U.S. Government Ran the Largest Automaker on Earth
And how it could have led to a collectivized American economy.
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Despite Socialists’ animosity towards the private ownership of industry, Socialism is not the antithesis of Capitalism — it’s the natural successor.
Socialists, especially those of the Marxist ideology, view Capitalism (private ownership of the means of production) as the foundation upon which the palace of Socialism (collective ownership of the means of production) will be built.
While there is no shortage of theory on this succession (mostly from Karl Marx himself), I can offer a more practical example of how this transition would play out: the United States government’s purchase and management of General Motors, and the foolish decision to return the company to Capitalist ownership despite their catastrophic failings.
Prior to the 2008 financial crisis, General Motors (GM) was the largest automaker in the world. It sold nine million cars in 2007, making it the most productive car company in the U.S., a title it holds today. But due to their vehicles being larger, more expensive, and less fuel-efficient than European and Japanese competitors, American automakers like GM were especially vulnerable to the 2008 financial crisis.
As the recession hit, consumers opted for the cheaper, more fuel-efficient cars, causing GM’s 2008 sales to drop by double digits while the cost of raw materials rose. This crisis culminated in “The Big Three” of Ford, Chrysler, and General Motors declaring bankruptcy and turning to taxpayers for a bailout.
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As part of President Bush’s 2008 Troubled Assets Relief Program (TARP), GM received a bailout of $49.5 billion dollars in exchange for a 60.8% stake in the company. This made the United States government the majority shareholder of one of the largest automotive manufacturers in the world. For all intents and purposes, General Motors was now a state-owned enterprise.
Unfortunately, the Obama administration looked at the GM’s management and thought, “Those guys did a great job! No notes!” Between 2009 and 2013, the government sold its GM shares back to its original owners for a net loss of $10.7 billion. And while the bailout undoubtedly saved General Motors, millions of jobs, and an untold number of lives, the decision to give Capitalism a Mulligan was a classic “definition of insanity” — doing the same thing over and over while expecting different results. Should financial ruin strike again, there’s a high chance the American taxpayers will yet again be asked to bail out private companies while receiving nothing for their efforts. (Just as they were with the airlines.)
The Road Not Taken
Above everything else, the GM bailout was a wasted opportunity. The 2008 Great Recession highlighted the largely unacknowledged flaws of Capitalism. Bankers, acting solely in pursuit of private profit, engaged in the legal-but-unethical practice of overselling subprime mortgages, which led to a housing bubble. When this bubble popped, the floor of the global Capitalist economy went with it. But rather than seeking to resolve these intrinsic flaws and prevent reoccurring harm, Obama chose to be an agent of capital. He simply gave the company back to the very people who crashed the company, after the taxpayers had made them even wealthier.
Had the government kept its stake in General Motors, the company would have continued on as a government enterprise (*cough* Socialism *cough*) under the democratic control of the people. This would have been a nightmare for pro-Capitalist critics of Socialism, who claim the government is too cumbersome and unresponsive to real-time needs to run a business such as GM. Such critiques often point to the worse failings of Soviet grocery stores or concoct absurd hyperboles like “government committees to decide how many bristles should be on a toothbrush.”
But the case of General Motors disproves these assertions. The brief period of government control was far from the bumbling bureaucracy anti-Socialists would have us believe. During the four years of government ownership, General Motors stock rose from a measly ¢.47 to $32.55. GM sold over 6.5 million cars in 2009, followed by 8.39 million in 2010, and 9.025 million in 2011, returning it to the top global producer of automobiles.
Those who argue on behalf of private ownership will claim GM’s current success is a win for Capitalism. But this logic is comically flawed. After all, GM was saved by government intervention and collectivized industry. To tout this as a Capitalist win is no different than a captain who runs his ship aground, has to be saved by the Coast Guard, and boasts of his seamanship prowess once safely ashore.
Nope & Change
Had the Obama administration chosen to preserve collective ownership of GM, not only would it have bulwarked the auto industry against future collapse, but it would have opened the door to much-needed government action in other areas of the economy. For example, the recent shortage of baby formula could have been solved by state manufacturing. But when addressing the issue, Transportation Secretary and adult Pinnochio come-to-life Pete Buttigieg had this to say: “Let’s be very clear. This is a capitalist country. The government does not make baby formula.”
Perhaps had Obama actually sought to resolve America’s problems instead of kicking the can down the road, there’d be a larger political appetite for Socialist policies, such as nationalized baby formula and meat production. (Check out The People’s Policy Project’s piece on nationalizing meat producers.)
But he did not. Capitalism ran General Motors into the ground. The democratic will of the people saved it. Unfortunately, what should have been a natural evolution of the American economy was reversed for the preservation of private profit, sending the United States back into the Groundhog Day cycle of Socialism for the rich, Capitalism for the poor.
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Check out this video, Who Financed the Great War? examining the financial pressures that led the U.S. into WW1. In my opinion, the causes and impacts of The Great War have been vastly unacknowledged in the American mainstream.
I made the case for a state-owned airline in DemocraticLeft, the official magazine of the Democratic Socialists of America.