The Redhunter

Let us be fair here. When we say nationalization, this is not like in South America, where governments take over the most profitable enterprises, like mining or oil companies. GM is a failed company. This is corporate welfare and corporatism, because now someone in the government will be making decisions for this failed business.

Once the government takes over successful companies, then I will agree that the government has crossed the line and makes choices for consumers, markets and entrepreneurs. Right now the government just has all the dogs (GM, Citi bank, etc.).

I completely agree when you say
----Both sides believe in a "mixed economy" but disagree profoundly about where to draw the line.----

Europe is a mixed economy. I know conservatives love to rant about European socialists, but here (Poland) in I can chose to buy McDonalds, Polish peiroges from cheap restaurant or a fancy one, pretzels from the street vendor at 1.30 or 1.50 zltoy. The government does not completely control the market. True, there is no melamine milk for me to buy in this regulated economy, but that is OK by me. Another thing I have learned here is that conservatives in the US have a very faulty view of `socialism` in Europe. Most people I haven spoken with have an income tax rate of around 30%. Only in Scandinavia do the rates approach 50%. Look at the world-wide tax rate webßite.

European firms like Royal Dutch Shell, HSBC, Telefonica, Nestle, Roche, Inbev (owners of Budwieser) and Stihl are not guided or controlled by the European nanny state any more than their American counterparts. These firms are regulated by the government, but are owned by stock holders who seek profit. To say the European economy is where the state owns some, and guides the rest of the economy is a false and extreme oversimplification that I hear repeatedly from the far right.

I have been called a socialist for requiring developers to install sewer pipes or sidewalks. Now we all are forced to live in my socialist world where raw sewage does not flow in the gutter and pedestrians can safely walk down the street. Oh, the inhumanity of it all!!

It's an interesting post. It's misleading to say, as Goldberg does, that "corporatism is the economic doctrine of fascism." Lots of non-fascist economies run along corporatist lines as well. Britain from WWII to the 1970s was essentially corporatist. "Fascism" in this context is just a buzzword that partisan pundits use to get everyone all riled up.

The same is true for the way that conservatives use "socialism". For a lot of Republicans it seems like the word is a priori a terrible thing. "That's socialist therefore evil therefore we must resist it." I think Jason's right to say that it's not a very nuanced view of the way European economies work. It's not that terrible over here, guys! (Neither are we drowning in fanatical Muslim immigrants or flirting with a return to jackboot totalitarianism either, for that matter.)

To return to the practical issues, are you actually saying that the government should just let GM collapse completely? All those jobs gone, and a whole industrial sector ceded to the Japanese? Not even the Bush administration had the free market stomach for that. What happened to Buy American?

Not too long ago, I remember a news story about the IRS taking over a business. The owner did not pay taxes and the IRS confiscated the only asset the man had, his business. This is nothing all that amazing. In fact, it's not even newsworthy. What got it into the news, though, was that the business was a brothel in Nevada where prostitution was legal. Since the owner was either not paying taxes or was cheating on his taxes he lost possession of the company to the IRS. As legal shareholder, the IRS sought to sell the shares to someone else. In the meantime they were the owners of the brothel which continued to do business and whose profits were the property of the gov't to offset the man's tax bill.

Needless to say, there are probably plenty of cases where the IRS owns a business. I'm sure plenty of rental properties have fallen into the IRS's hands, business equipment, boats, cars and so on.

One more interesting observation, when the Nevada brothel was 'socialized', it probably represented the gov't owning more of the economy's net production than when its 60% stake in GM.

Government ownership of stock shares is not socialism, it's capitalism. It's no different than a local gov't putting surplus cash into a savings account at a local bank. In both cases one asset (cash) is willingly traded for another asset (a bank liability or shares of a company). But you say GM didn't willingly sell itself to the Feds? Bull! The US Gov't has put something like $20B into the GM and is going to put something like another $20B. If 60% of GM is worth more than $20B then where is the offer? I'm sure both the union and the bondholders who GM owes a lot of money too would rather take a few more pennies on the dollar if, say, Warren Buffet or Honda were willing to trade $25B for 60% of GM. They aren't.

Now in theory the gov't could use its shares to do all types of things. It could decide, for example, to close down all Mexican plants and open the m up in the US. So what? The gov't has parks, buildings, departments, military bases and so on all throughout the US for hundreds of years now and no one screams socialism? Because it brought all those things and paid for them with taxpayer (or bond lenders) money.

"I don't believe any of it for a second. I think that once the liberals realize what they've got on their hands they'll be the ones crying "from my cold, dead hands...." "

What they got on their hands is 60% of a company that is probably not worth what they paid for it. So what exactly is that? Well it's not really much of anything. If the company recovers maybe down the line its share price will go up and both the gov't, the UAW and the bondholders who have had to exchange their IOUs for shares will see some money if they cash in. On the other hand, if GM continues to slide after this a new bankruptcy will wipe out all shareholders (which means the gov't will have nothing along with all the other ones).

This is probably why Obama is advocating a 'hands off' policy in regards to the gov'ts shares of GM. Whatever ideas that gov't may have that could be done with GM....like smaller cars or preference for US manufacturing could be done a lot cheaper by simply using the Fed. government's policy tools (a fuel efficiency mandate costs the US gov't very little, a $3,000 credit for highly efficient cars is a lot cheaper to get lots of high mpg cars on the road than spending $20B to buy a defunct auto company and oversea their construction). On the other hand, if GM recovers quickly selling off the shares a few years from now could serve as a nice one-time revenue source to plug a budget gap.

As far as creeping socialism, blah blah blah blah. The US was closer to socialism when the gov't owned the Nevada brothel. Owning non-productive enterprises is not what socialism is about. Socialists wanted the gov't to own the *productive* enterprises.

I think the choice was to get involved in some fashion similar to what the government did -or- let GM close its doors. The choice was made to take what was considered the lesser of two evils.

Clearly you disagree with the position taken, but I didn't see where you proposed what should happen instead.

Fair enough Joe; I'd have let GM go bankrupt. The pieces would have been bought up and business would go on. A few folks would have lost their jobs but most of the company would have gone on.

Mean? Callous? In the short term there'd be problems. In the long run we'd be better off. As such, the government should provide short-term benefits for the unemployed but that's it.

Thank you everyone for stopping by and for your comments. They're all informed and thoughtful, whether I agree or not. You've given me a lot to think about.

I would have (and this applied to the banks too) let GM go provided a massive substitute plan was put in place to address the aftermath of GM going . This might have included massive retraining grants, extended unemployment, grants and loans to laid off workers to relocate, etc. Barring that I'd have saved GM on the grounds that an economy in a depression shouldn't take on another hit. In essence, I'd have saved GM for the same reason your doctor would have told you to stay home from work when you had the flu but otherwise would have said you should hold a job.

What I'd like to highlight, though, is a distinct difference between this policy (which we may debate) and socialism. Socialism is about the gov't running businesses because the gov't either thinks it can run them better or run them with some public purpose in mind. Hence my example of nationalizing coal mines. Not because they were bankrupt but because the gov't wanted to increase worker pay while keeping the price of coal low for consumers.

In essence, GM is just gov't intervention in the economy which is an old story. It is not fundamentally different than, say, the ethanol industry which seems to exist entirely due to tax breaks, subsidies and mandates. Or lots of farms, for that matter. We can also debate whether the Fed lowering interest rates isn't, in effect, a massive attempt to intervene to save businesses.

GM, though, has the advantage of being very explicit, very public. It might even let the taxpayer break even in the long run or make some money.