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When Socialism Saves Capitalism

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Posted on Sep 21, 2011

By E.J. Dionne, Jr.

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.

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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.

E.J. Dionne’s e-mail address is ejdionne(at)washpost.com.
   
© 2011, Washington Post Writers Group


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By ardee, October 15, 2011 at 12:36 pm Link to this comment

Anarcissie, September 25 at 8:37 am Link to this comment

If I misunderstood your point I apologize. But I think I responded correctly. In the absence of any seeming desire on your part to clarify or instruct me in what I misread I can only assume I was accurate.

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Anarcissie's avatar

By Anarcissie, October 15, 2011 at 7:01 am Link to this comment

ardee—I don’t think you read what I wrote very carefully.  Or maybe I wrote it badly.  I wonder if I should write it all over again.  Maybe not.

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By ardee, October 15, 2011 at 6:15 am Link to this comment

However, when I say ‘socialist’ I mean that the actual ordinary worker has actual ownership and control of the actual means of production in some way.

Of course, Anarcissie, this is a precise definition of a socialist state, one which has yet to manifest itself. Other than adopting certain principles of socialism in some nations there is yet to be a true socialist or communist nation as defined by Marx and Engels, the attempts so far ending up as rule by an elite, the antithesis of what is defined as socialism or communism.

Yet you seemingly continue to offer proof of your position by mistakenly defining socialism by the presence of governments claiming to be such but which are bastardized versions.

I find this a bit disingenuous and more than a bit of a stretch.

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By John Poole, September 26, 2011 at 6:42 am Link to this comment
(Unregistered commenter)

The bailout of Big Auto in my opinion was to keep the “dream” of owning a large
powerful, fast, prestigious and expensive automobile alive by keeping the
builders of such autos in business. It was a tragic lost opportunity and disservice
to human conveyance evolution.

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Anarcissie's avatar

By Anarcissie, September 25, 2011 at 9:22 am Link to this comment

Raylan—As I see it, the Left is the party of peace, freedom, and equality.  I seldom see governments promoting peace, freedom and equality.  In my analysis, that is because government is based on the ‘monopoly of violence’, that is, total coercive power.  Democracy is one of several strategies to limit that power, but, in the United States for example, it doesn’t seem to work on a national scale; a favorite theme of the people who write on this web site is that the rich are actually in control of the system.  Hence, instead of defining a ‘public sector’ as socialism, I prefer to see socialism as the actual ownership and control of the actual means of production by the actual workers.  You can call this an ‘anti-Left’ bias if you like, or an ‘anti-calico-cat bias’,  but it makes no sense to me.  From my point of view, you’re being suckered by a political shell game.

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By RayLan, September 25, 2011 at 9:00 am Link to this comment

@Anarcissie
Your anti-left bias is showing. The definition of socialism does not contain the word ‘government’ - it does contain the word ‘public’ and in a democracy , the public sector is the government. That’s the difference between communism which depends on totalitarian control and socialism in which ownership (and therefore power) is in the hands of the public collective which can be the government.

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By Anarcissie, September 25, 2011 at 8:37 am Link to this comment

If we define ‘socialism’ as any instance of government control of production, then of course there are lots and lots of socialist countries and always have been going back to the pharaohs.  However, when I say ‘socialist’ I mean that the actual ordinary worker has actual ownership and control of the actual means of production in some way.  If you don’t see a difference between that and having the means of production governed by a centralized authority with total coercive powers I think we’re stuck.  But at least you can be happy with all that socialism!

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By RayLan, September 25, 2011 at 8:22 am Link to this comment

Correction
@Anarcissie
“I think it’s highly debatable whether actual socialism can be established through government”
What debate? Socialism isn’t libertarianism - there are several European examples also in South America

http://www.soundsandcolours.com/articles/ecuador/socialism-is-alive-and-kicking-in-south-america/

You can debate the facts - but you know what that’s called.

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By RayLan, September 25, 2011 at 3:46 am Link to this comment

@Anarcissie
“I think it’s highly debatable whether actual socialism can be established through government”
What debate? Socialism isn’t libertarisnm - there are several European examples also in South Africa

http://www.soundsandcolours.com/articles/ecuador/socialism-is-alive-and-kicking-in-south-america/

You can debate the facts - but you know what that’s called.

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By Anarcissie, September 24, 2011 at 9:33 pm Link to this comment

I think it’s highly debatable whether actual socialism can be established through government.  There don’t seem to be any historical examples.  The fundamental contradiction is that socialism is supposed to be effectively classless, whereas governments, at least those of any size, create at least two classes, the governors and the governed, and of course the governors, being dominant, arrogate more and more power to themselves.  This is what happened, for instance, in the early days of the Soviet Union.  So in effect one replicates one of the problems of capitalism, its class structure, in one’s supposedly socialist state.  That is, if you think class is a problem, as I do.

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By Lincoln, September 24, 2011 at 2:50 pm Link to this comment

@ cyndiw,
Go back to school or at least open up a dictionary.

For a true perspective and actual reporting on the Current UAW screwing of the auto worker please see
http://www.wsws.org/articles/2011/sep2011/auto-s21.shtml
And
http://www.wsws.org/articles/2011/sep2011/auto-s23.shtml
Maybe Mr. Scheer should get an actual Socialist Journalist to balance out, with all due respect, the garbage produced by Dionne, Jr.
Better would be to just leave what he purports to be journalism on the pages of the WP and then used for what it is best suited for, fish wrap.

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By RayLan, September 24, 2011 at 9:37 am Link to this comment

@Anarcissie
which means public ownership of capital (means of production) So when the government buys out a private company, that is, when it is possible to do that, it is a socialist program. When the corporation however is still privately owned, it is is a compromised sort of capitalism, what Noam Chomsky calls “Nanny capitalism’ - pseudo-capitalism - pseudo-socialism.

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By Anarcissie, September 23, 2011 at 8:06 pm Link to this comment

RayLan, September 23 at 1:55 pm:

@Anarcissie
“Dionne doesn’t know what socialism is.  No surprise there”
Please enlighten us.

Socialism is the ownership and control of the means of production by the workers.

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Psychobabbler's avatar

By Psychobabbler, September 23, 2011 at 6:48 pm Link to this comment

Socialism means shared ownership of the workplace.

There is nothing controversial, unreasonable or radical about it until it is packaged as recycled cold war propaganda and shoved down your throat in the media.

http://www.youtube.com/watch?v=K4Tq4VE8eHQ

Pea Tardy response:

http://www.youtube.com/watch?v=zu4DtlZTMdU

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By cyndi W, September 23, 2011 at 4:36 pm Link to this comment
(Unregistered commenter)

Big government is big government. Social democrats (as Obama began under) want to use democracy to end up socialist (Marxist: Nazi-the ‘s’ sound is for ‘socialist’, or communist- the next step. Fascist is just another name for this kind of ‘state capitalism’.

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RayLan's avatar

By RayLan, September 23, 2011 at 2:02 pm Link to this comment

Noam Chomsky calls big corporate bails outs ‘Nannty Capitalism’.
The small business and individual must deal with the ‘discipline of the market place’ but if one the big piggies gets hungry, the Nanny government throws it a boat load of pig feed.

Obama’s cabinte is well stocked with big corporate capitalists. He so far from being socialist it’s scary.

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By RayLan, September 23, 2011 at 1:55 pm Link to this comment

@Anarcissie
“Dionne doesn’t know what socialism is.  No surprise there”
Please enlighten us.

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By Gregory, September 23, 2011 at 1:42 pm Link to this comment
(Unregistered commenter)

So there was no other way to save GM, other than taxpayer bailout?  Why don’t I get a taxpayer bailout?  Why does GM qualify for one?  Where does it stop?  How do you know that a GM failure might not really be beneficial in the final analysis?  No one knows for sure what might have risen up out of the ashes.  No company is eternally successful.  Most will decline at some point, when someone comes up with a better idea.  Why not give someone else the opportunity to do it better?

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By Mike Dimmer, September 23, 2011 at 10:34 am Link to this comment
(Unregistered commenter)

Hey Bill,  how about GM paying back the $15 billion first before you declare a
victory for Socialism? Oh wait, that is a victory for Socialism.

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By Kalpal, September 23, 2011 at 7:00 am Link to this comment
(Unregistered commenter)

I was born and grew up in a socialist country. As I grew to understand it, a socialist country is operated for the benefit of the workers whose labor produces national wealth. A capitalist country is operated for the benefit of the wealthy and aristocratic superwealthy who have the resources to buy legislation assuring them unfair advantages at every step of the way. 

Maybe someone out there can explain to me what exactly I have misunderstood about socialism and capitalism. Please keep in mind that I see the USA as being very much a capitalist nation whose laws are being distinctly skewed to benefit the rich and punish the poor. (Anti-abortion legislation only affects those who lack the resources to circumvent those laws, ergo they are intended to punish the poor for having the temerity to indulge in sexual intercourse.)

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By Anarcissie, September 22, 2011 at 7:07 pm Link to this comment

Dionne doesn’t know what socialism is.  No surprise there.

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By kalpal, September 22, 2011 at 1:35 pm Link to this comment

The middle and working classes as well as the poor exist solely to be exploited by America’s aristocracy of wealth. Any notion of shared prosperity or sacrifice is discarded as foolish nonsense unworthy of greedy thieves running businesses that only move around money and skim some off the top but never actually produce anything of value to the society as a whole.

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By Misfiteye, September 22, 2011 at 9:54 am Link to this comment

We should stop thinking of businesses as job creators.  They are profit creators.  If they must create a job to make a profit, they will.  If they can improve their profitability by eliminating jobs, they will. 

The New Republic - Brooks Brothers Bolshevism 09/14/2011
Michael Cembalest, the chief investment officer of JPMorgan Chase, wrote in July of this year (in a clients-only newsletter obtained by Washington Post columnist Harold Meyerson) that “profit margins have reached levels not seen in decades,” and “reductions in wages and benefits explain the majority of the net improvement.” (Cembalest printed the latter quote in boldfaced lettering.) “US labor compensation,” he explained, “is now at a 50-year low relative to both company sales and US GDP.”

In the same time period, Corporations have greatly increased their political influence, devastated the unions and weakened the labor laws.  They are in business to benefit themselves at the expense of everyone else and if we dare to complain, they accuse us of waging class warfare.

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By bpawk, September 22, 2011 at 9:14 am Link to this comment

What the writer and the posters fail to notice in this article is that GM is making profits from sales overseas not in North America - we bailed them out but they have been posting profits from foreigners (who didn’t bail them out). Get it!

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By John Poole, September 22, 2011 at 8:08 am Link to this comment
(Unregistered commenter)

Thanks to the Detroit auto bailout by Uncle Sam many Americans now “qualify” for
a huge loan to buy more car than they need or have any right desiring.  I have no
idea what a vehicular “bubble” bursting would mean but maybe we’ll see “robo”
automatic midnight towing by overworked Repo guys.  Like Wall Street and the big
banks being bailed out and not changing their ways I see Detroit not changing its
ways and wanting to still make big profits from large and expensive vehicles.

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By Jason Pacifico, September 22, 2011 at 8:03 am Link to this comment
(Unregistered commenter)

At the time, Obama did not go far enough! I mentioned at the time they should have infused GM and Chrysler w/ 10-30 billion dollars to keep 12 factories opened they eventually closed. Not far enough, but a modicum of “socialism” for workers, not Wall Street (TARP). (See Hal Draper: “The Two Souls of Socialism”)

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David J. Cyr's avatar

By David J. Cyr, September 22, 2011 at 7:03 am Link to this comment

Whether prospering or desperate, the American sheeple always prefer to live with lies, rather than truths.

The primary product of the corporate-state is to provide lies. All its crimes rely upon them.

http://www.chenangogreens.org

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By glider, September 22, 2011 at 6:51 am Link to this comment

BeReal,

It is amazing what one can believe when one’s well being depends on it.

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By Salome, September 22, 2011 at 6:24 am Link to this comment
(Unregistered commenter)

I get the idea of shared sacrifice but what about shared prosperity?

Lawrence O’ Donnell (MSNBC) has a psa where he says that Republicans “just don’t get”, that it is investment in education and infrastructure that have made this country great.  I disagree.  It is precisely because Republicans ” get it” that they are trying intensely to construct the laws and systems of this nation so that they and their cronies can benefit from that prosperity while simultaneously denying any portion of that prosperity to the majority of Americans.

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By Niko, September 22, 2011 at 5:27 am Link to this comment
(Unregistered commenter)

to: unreg reader: Miko
This comment deserves clarification.
What is the point of this comment? To denigrate the
article’s intent or the author?
Do you see the taxpayer temporary bail out
of the only manufacturing left in this country
as fascist? Did Mexico lose by nationalizing the oil
companies? Is the success of the auto companies not
good for the nation?  Do you live/work in Michigan?
Are you employed? Have you ever been a member of a
union?
Is Mr Dionne suggesting the bail-out was a “fascist”
move? Fascism is here. The worker’s profit -sharing
benefits = a socialistic turn way from
fascism/capitalism toward ‘providing for the general
welfare.’

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By BeReal, September 22, 2011 at 5:07 am Link to this comment

What I simply do not understand is how anyone can still believe that tax cuts for the rich (the ‘job creators’ - who have created NO/ZERO/ZILCH jobs in this extremely abundant year for corporations) and cutting spending that will simply put MORE people out of work, can POSSIBLY save the economy! They do not seem to understand the simplest arithmatic, let alone higher math!

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By ardee, September 22, 2011 at 2:48 am Link to this comment

so·cial·ism/?s?SH??liz?m/
Noun: A political and economic theory that advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole. 

Sounds like it to me….

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By Miko, September 22, 2011 at 1:01 am Link to this comment
(Unregistered commenter)

“OK, the bailout of General Motors and Chrysler was not
socialist in the classic sense”

Nope.  More accurately, it’s only socialist in the
sense of being pure fascism and having nothing to do
with socialism.  That Dionne would suggest any
equivalence between the two tells us everything we need
to know.  And even if that didn’t tell us everything we
needed to know, the fact that Dionne thinks that it was
successful still would.

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