Promoting education and healthcare for all, providing for the poor, and protecting the environment does not a socialist make. And neither does the bold, informed action of President Obama and his administration in providing temporary, public investment capital to General Motors, a manufacturer and employer important to our economy. Not when restructuring and recovery were quite possible, even quite likely. Not when a return to private ownership and successful market participation was the only purpose and goal of government intervention. And not when the controlling investment in GM stock was so structured that a successful turnaround by GM allows them to buy out the government investment as soon as they are able--and with a likely profit to the government and taxpayers.
Yes, I had my reservations, too, but on balance trusted Obama and the analysis of his team in those challenging times without precedent. It was trust well placed.
General Motors has made the most of the Obama administrations decision. The huge company was significantly restructured and downsized, and now has become competitive again. Their recent market performance has been strong--profitable--and promising. And now they have announced a public offering of their securities, the proceeds of which will be used to buy back the controlling interest in their stock from the government. In the process, the US government and the American people will have saved a substantial employer and contributor to American economic life. And yes, the taxpayers will likely realize a profit, too.
And now that Obama's goal for GM is about to be realized, perhaps he might receive some simple acknowledgment of his basic intentions and success? Some respect? Trust? Basic credibility? But no, not likely.
And so it falls to The Economist--the most credible spokesman for, and defender of, the high ground of a healthy free-market economy and the social programs necessary to support, strengthen and stabilize it--to render an accurate and fair assessment. From The Economist:
Yes, I had my reservations, too, but on balance trusted Obama and the analysis of his team in those challenging times without precedent. It was trust well placed.
General Motors has made the most of the Obama administrations decision. The huge company was significantly restructured and downsized, and now has become competitive again. Their recent market performance has been strong--profitable--and promising. And now they have announced a public offering of their securities, the proceeds of which will be used to buy back the controlling interest in their stock from the government. In the process, the US government and the American people will have saved a substantial employer and contributor to American economic life. And yes, the taxpayers will likely realize a profit, too.
And now that Obama's goal for GM is about to be realized, perhaps he might receive some simple acknowledgment of his basic intentions and success? Some respect? Trust? Basic credibility? But no, not likely.
And so it falls to The Economist--the most credible spokesman for, and defender of, the high ground of a healthy free-market economy and the social programs necessary to support, strengthen and stabilize it--to render an accurate and fair assessment. From The Economist:
An apology is due to Barack Obama: his takeover of GM could have gone horribly wrong, but it has not.
AMERICANS expect much from their president, but they do not think he should run car companies. Fortunately, Barack Obama agrees. This week the American government moved closer to getting rid of its stake in General Motors (GM) when the recently ex-bankrupt firm filed to offer its shares once more to the public.
...GM was on the verge of running out of cash when Uncle Sam intervened, throwing the firm a lifeline of $50 billion in exchange for 61% of its shares...Many people thought this bail-out (and a smaller one involving Chrysler, an even sicker firm) unwise. Governments have historically been lousy stewards of industry. Lovers of free markets (including The Economist) feared that Mr Obama might use GM as a political tool: perhaps favouring the unions who donate to Democrats or forcing the firm to build smaller, greener cars than consumers want to buy. The label "Government Motors" quickly stuck, evoking images of clunky committee-built cars that burned banknotes instead of petrol—all run by what Sarah Palin might call the socialist-in-chief.
Yet the doomsayers were wrong...Mr Obama has been tough from the start. GM had to promise to slim down dramatically—cutting jobs, shuttering factories and shedding brands—to win its lifeline. The firm was forced to declare bankruptcy. Shareholders were wiped out. Top managers were swept aside. Unions did win some special favours...but by and large Mr Obama has not used his stakes in GM and Chrysler for political ends. On the contrary, his goal has been to restore both firms to health and then get out as quickly as possible. GM is now profitable again and Chrysler, managed by Fiat, is making progress. Taxpayers might even turn a profit when GM is sold.
So was the auto bail-out a success?...Given the panic that gripped private purse-strings last year, it is more likely that GM would have been liquidated, sending a cascade of destruction through the supply chain on which its rivals, too, depended. As for moral hazard, the expectation of future bail-outs may prompt managers and unions in other industries to behave rashly. But all the stakeholders suffered during GM's bankruptcy, so this effect may be small.
Socialists don't privatise
That does not mean, however, that bail-outs are always or often justified. Straightforward bankruptcy is usually the most efficient way to allow floundering firms to restructure or fail. The state should step in only when a firm's collapse poses a systemic risk. Propping up the financial system in 2008 clearly qualified. Saving GM was a harder call, but, with the benefit of hindsight, the right one. The lesson for governments is that for a bail-out to work, it must be brutal and temporary. The lesson for American voters is that their president, for all his flaws, has no desire to own the commanding heights of industry. A gambler, yes. An interventionist, yes. A socialist, no.
Yet, the agents of the ideological Right, the populist demogogues and bigots, too, continue to perpetuate lies and ill wishes toward President Obama. And too many uninformed or ill-informed Americans embrace them so readily and desperately.
According to a recent poll, 20% of Americans still believe (or want to believe) President Obama is a Muslim, when he is an active, professing Christian. (As though that should make a difference.) Many of those same people, and others, apparently believe (or want to believe) he is a socialist, even as most of them apparently lack any useful understanding of what the term actually means. That, or they find it convenient to ignore Obama's advocacy of a robust, creative and intelligently regulated free-market economy, a healthy economy that also funds the social programs that identify a modern, advanced society, and are necessary to support, stabilize and perpetuate it.
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