Sunday, November 28, 2010

Enemies agreeing, and wrong

Something that’s fascinated me in recent weeks is how America’s political left and political right essentially agree on some issues, though often for different reasons and with different objectives. Until yesterday, however, I didn’t realise the bailout of GM was one of those issues.

The video above is a commercial GM ran thanking American taxpayers for saving them. It’s an effective ad. Over on Joe.My.God., where I saw this, the comments from the left end of the spectrum were illuminating.

I’d always known the right was opposed to the bailouts. It was “socialism”, they declared. But it turns out the leftists were just as opposed because it was “fascism”. Now, it’s a fair bet that the vast majority of people throwing around those words have no idea what they mean, but there’s an element of truth in both viewpoints—a very small kernel of truth, but one big enough for them to hang on.

The bailout of GM was socialistic in that it was a government takeover of a means of production—but we’re talking one company, not en entire industry, so it was not socialist. Similarly, it was fascistic because it was government policy being used to advance business interests—but it was done through loans and equity investment in one company which is not what fascists do.

So, the hyperbole of both the left and the right is wrong—and utterly daft, if we’re honest. Even crazier is the rhetoric shared by both the left and the right: GM should have been left to fail. The left and the right actually have a shared reason for saying that, namely, that government shouldn’t bail out private business.

The right thinks that the company should have been allowed to fail so it would “break” the unions (never mind that their power has been declining for decades). The left feels that it should have been allowed to fail because saving it only benefited the corporate elites (never mind the ripple effects through the economy that would have affected mainstream, ordinary Americans).

The truth is that if GM had failed, it probably would’ve taken the entire US auto industry with it. Its suppliers would’ve failed, making it almost impossible for Ford to locate parts, endangering Ford, which was trading at the “junk bond” level at the time.

Had GM failed, its workers would’ve stopped buying. Stores and services would’ve failed. As GM’s suppliers failed, their workers would stop buying and more stores and services would’ve failed—and on and on and on. These workers would’ve gone on a benefit, taking from the economy, not adding to it. It would almost certainly have pushed the severe recession into a depression. US unemployment remains stubbornly high—can anyone seriously argue that adding tens—or hundreds—of thousands of workers to the unemployment lines would’ve been a good idea? Well, yeah, that’s basically what the left and the right still argue.

All things considered, the GM bailout was the cheapest option available to the government. The US taxpayer now owns a minority of GM, after its recent successful stock offering and re-listing. In the end, taxpayers will at least break even on the investment, maybe make a profit. That’s good news, but you won’t hear the left or the right celebrating it.

Sometimes, it seems, political point-scoring is more important than simple humanity.


Roger Owen Green said...

I may be the only person in America not working for the auto industry or related industries, who thought the auto bailout was a good idea, but that the bank bailout was not so hot, mostly because the car companies had stringent requirements, bbut, under Bush esp, the financial companies did not.

Arthur Schenck said...

Not all that surprisingly, that's the way I thought about it all, too.