Is This Socialism?
TAP's Tim Fernholz has a nice, clear rejoinder to the charge that the GM takeover is "socialism":
It's fair to call the General Motors deal or the AIG takeover examples of socialist policy; government is directly intervening in a private concern. But it's not fair to say that the Obama administration is socialist per se because socialism is an -ism, a system, a guiding philosophy, and it's clear that putting the government in charge of private production is not the Obama administration's guiding philosophy. When some conservatives try to insist otherwise, that's when they look over the top. Maybe there's a point when these socialist policies add up to actual socialism (or in the banking system, lemon socialism) but we are far, far from it.
If the Obama administration had come into office without an economic emergency, they wouldn't be involved in these firms -- don't forget that the first big government takeovers came under George W. Bush and that the management and directors of the auto companies asked for government help. The current administration has made clear they don't intend to be in the auto making (or banking) business for very long, and voluntarily laid out various guidelines to keep politics out of business decisions. Obviously, lines will be fudged and there are plenty of opportunities for conflict, but this is clearly not an administration whose every answer is "seize the means of production" -- see, for instance, this graph, or the administration's deep reluctance to take over insolvent banks despite a fairly large constituency for such an action. Ultimately, then, I'm not sure it's productive for conservatives to call the administration's response to the auto makers "socialism" -- although, hey, maybe some political points in that -- but rather to harp on the fact that the government has made a pretty unfortunate investment because it thought the collapse of the industry presented a systemic risk to the economy.
Another way to think about this is that socialism is usually considered the alternative to "capitalism." Not so here. In the case of the financial crisis, socialist policies were understood as the alternative to the collapse of capitalism, and in the case of Detroit, the alternative to the collapse of a major private industry that was temporarily unable to access credit due to the aforementioned near-collapse of capitalism. This has been, at least in the Obama administration's estimation, socialism-to-save-capitalism, which rather distinguishes it from the project of more traditional socialists.
June 2, 2009; 4:26 PM ET
Categories: Economic Policy , Financial Crisis , Solutions
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