Wednesday, December 11, 2013

US Sells Last Shares of GM Stock, or, What Socialism?

The notion that the Obama administration is full of socialists took another beating yesterday, when the Treasury Department announced that the government has sold its last shares of GM stock. Rather than converting the company into a permanent government property managed to guarantee jobs, they have handed it over to a new and very aggressive management team that has cut the work force, closed dozens of plants, and achieved 15 straight profitable quarters. The notion that this is socialism simply baffles me. Do people not remember what socialism means?

According to the Treasury, the government lost $10 billion on its GM investment, which seems like a reasonable cost to me. The Troubled Asset Relief Program as a whole has actually turned a small profit, thanks to the magical way the surviving banks were able to turn the de facto government guarantee of their bonds into enormous profits.

There is a lesson here and it concerns the complimentary roles of markets and governments. Nobody disputes that markets can create great wealth and efficiently move capital into new industries. The very word "shortage" conveys the peculiar power of our economy, since what was for most of our existence the normal state of affairs (not enough stuff to go around) has now become a strange anomaly. But markets are vulnerable to bizarre swings and sudden crashes that can have devastating impacts on people's lives. When this happens, a government with enough money and power can step in and ease a path through the crisis.

This is why the great crash of 2008 led only to a stubborn recession, not an immiserating depression. As to why government intervention did not lead to a real economic recover, I say that is because we did not spend nearly enough. If our stimulus had been three times as big as it was, and had the Europeans taken similar measures, we might be in another economic boom. I admit that this is speculation, but I think events have proven every sort of crazed libertarian wrong: especially the ones who said government interference would cripple the auto industry.


leif said...

rhetorically you asked "Do people not remember what socialism means?" -- i'm a fan of answering rhetorical questions. i believe it's not that people have forgotten, but that for decades, our schooling has failed to educate children or young adults on neutral, denotative meanings that stick. here, 'stick' implies that the information persists beyond the next quiz, preferably into adulthood, and assumes the form of knowledge.

John said...

Yes, I suppose this is related to what I wrote about in my post on Tony Judt's new book, about how much of the history of the 20th century has been forgotten.