Socialism’s Second-Guessers
But the failed system advocated by the New York Times is not our only alternative. Capitalism — to the extent it’s been allowed to operate — has always succeeded magnificently. Why? Because here individual owners decide what to do with their own property — and then reap the consequences of their decisions. Faced with the ongoing issue of how to best use limited capital, those who make foresightful decisions — who think and act strategically — tend to succeed, to produce profits. In other words, those who use existing property productively are rewarded with additional property to control. Under capitalism then, rather than being a social entitlement, the ability to use property is earned by virtue of producing it.
The converse holds too. Making poor decisions leads to losses. Or as TV disclaimers have it: “past success is no guarantee of future profits.” That’s the dynamism of capitalism. The pithy 19th century adage — “from shirtsleeves to shirtsleeves in three generations” — was literally true. In a free market, people are continually confronted with decisions and competition such that, over time, great wealth can be earned or lost by anyone, regardless of their initial circumstances.
So capitalism justly rewards success and penalizes failure. By what mechanism? By the uncompromising protection of individual rights. In this context, foremost by the protection of property rights, which means the absolute right of owners to use and dispose of their property as they see fit (obviously without violating the rights of others). Secondarily by allowing those who fail — to fail. Which means no bailouts, no socializing losses, etc.
Yet achieving justice isn’t capitalism’s only virtue. It also fosters social harmony. To see this, contrast it to socialism where, perforce, we’re each concerned with every decision anyone else makes. The result is a nation of intruding, whining, Monday-morning quarterbacks. Did GM overspend on advertising? Are doctors prescribing too many pain meds? Is Fannie Mae’s CEO paid too much? The list of potential affronts to redress (via government intervention) is endless.
Not so under capitalism. Here each person’s concern is exclusively with their own property. For instance, if I’m not a shareholder of a firm, I really don’t care what the CEO is paid. Indeed, if I think a particular company is overpaying its CEO, rather than it being a grievance — it’s an opportunity. Namely for me to start a business where I save money by offering reasonable compensation — thereby winning market share due to my lower costs. The beauty of capitalism is that it works by free competition; there’s no need to lobby the government to forcibly intervene in anyone else’s business.
While the narrow question of whether a pitcher gets a car is inconsequential, the general question of who controls property is crucial. For wherever and whenever property is socialized, destructive meddling, second-guessing, and other disasters ensue. Yet that’s today’s trend. For example, with the passing of ObamaCare, others will now decide if we, as patients, are worth the cost of an MRI, a specialist’s time, or even a life-saving drug regimen. There’s but one solution to this disastrous trend: reinstate the only political system which protects property rights — laissez-faire capitalism.
After the chaos clears in the conflict between socialism and capitalism at some indeterminate point, we will have found that there is a third alternative to these ‘isms’. It is an unfortunate one, but it is as stable or more so than either socialism or capitalism. It lacks a firm appellation, but it is characterized by poverty of deep thought, innovative action and wealth above subsistence. It is what we see on travels to quaint places in the Middle East, Russia, and the ‘stans’ just south of Russia. There is bustling small business, accumulation of wealth in the hands of a few, little creation of wealth, no support of research, tribalism in various forms, government that is an end in itself and does not address the needs of the people, fear of the stranger, careful and fearful interactions among people that know full well that only their sham modesty keeps them from personal destruction. In such societies it is presumed that the family or the clan will absorb the many unemployed, the elderly, and the helpless children, and will countenance the inevitable jettisoning of the very sick chick to be pecked to death by the cruel world outside the family door or the cloistered courtyard. It was this wracking fearful poverty that spawned both capitalism and socialism. Such ‘primitive’ societies accepted that there would never be sufficient work for even the able-bodied of the population – perhaps realistically. It is a lower level of organization and thus provides simpler problems and solutions. Frankly, both socialism and capitalism share the trait of complexity that forces them to change frequently and often violently. Poverty-ism at least is stable. Thus, we in complex societies, when we are sufficiently depleted by our edgy existence, have always reached back for the nostalgia of a ‘simpler life’, for the country life, for agrarian or pastoral pursuits, since this is what we evolved from. In his later years, Diocletian, Emperor of Rome, took up growing vegetables. Poor humans!
The main effect that socializing Government Motors has had on me is that I’ll never buy another GM product as long as I live. “Buy American” used to be a mantra for patriots. Now, the practice can lead to the next permutation of that nasty disease known as international communism.
It actually goes much further than you say. When we are all forced to pay for everyone else’s health care, don’t we have a right to control their behavior in regards to how it might have an impact on health care costs? No bacon for you–no motorcycles for you–no risky sexual behavior you. The possibilities are endless.
But for the people pushing such an agenda this is a big feature and not a bug at all.
Almost an nation would rush to save their biggest industry, especially with there would be a tidal wave effect from its failure. In GM’s case that would include all of its suppliers and any services provided to its employees. Of course most Tea partiers would prefer living in a 3rd world country
I’ve always known liberals were idiots, but here on PJM, they go out of their way to prove it.
The failure of GM would have made the US a third world nation?????????
One gets the idea that liberals actually believe that when a company goes bankrupt, it’s factories etc., are vaporized and no longer exist.
Out here in the real world, what happens is that either the bankrupt company is bought out, in it’s entirety, by someone else, or the pieces of it are sold off to other companies that are able to use them more profitably.
The factories wouldn’t disappear, they would be operate under new management.
Come to Michigan, David, and see for yourself what that thinking has created. Michigan is in a full blown depression, and Detroit is a disaster. The level of human suffering in Detroit is staggering. Of course, those comfortable faux liberal people in the suburbs just look the other way and pretend it isn’t happening, because no one wants to upset their own neat little ideological cart.
David,
we forget that the bail out for GM forgave $58 b in $ owed to those same suppliers and services.
we forget that GM could have sold off the profitable parts to someone else, and filed Chapter 11 on those divisions not profitable. This would have allowed those same suppliers and services that were part of GM’s success to continue.
however, filing for chapter 11 would have made any obligations to the unions null and void.
the GM bailout was all to pay back the unions for their support of obama. health care, cap and trade etc. etc..
what will the unions do when all the water has been removed from the rock?
Have you ever heard of restructuring David?
Well of course not, liberals rarely recognize anything more complex than their own belly button lint. But, briefly, this is the way it works. GM files for bankruptcy, GM goes into receivership, GM jettisons bad assets, creditors get some money, GM emerges from bankruptcy a leaner stronger company.
What would have happened had Obama actually allowed the world to work the way it is supposed to is GM and Chrysler would have gone into bankruptcy and come back out. Instead the American people are on the hook for billions they’ll never see back, creditors were strongarmed into taking pennies on the dollar for their investments and the companies are not really in much better shape than they were.
Way to go liberals.
Patrick
Not to mention that the union, which pretty much put GM where it is with their unrealistic demands and strong-arm tactics, now own the company. GM will never be profitable again. Thanks to Obama, we’ll paying this corporate welfare for as long as GM exists.
Yes, the unions have killed these businesses and will continue to do so. If (and it’s a big “if”) GM ever manages to IPO its stock again, you will be able to make money easily by shorting the stock.
D. Stein’s posting clearly epitomizes the progressives’ inability to deal with complex ideas, specifically…
1) They default to a zero-sum game model of economic entities, systems, and life in general.
2) They are unable to discern feedback mechanisms, including the ability to differentiate between positive versus negative feedback loops as found in macro-economics and various “social engineering” disasters foisted off on us by progressives over the decades.
3) They are unable to differentiate between open versus closed systems, for example Christianity as an open system with externally provided morality, versus secularism as a closed system having internally derived “values”. In addition, inherent to this distinction is the inability of a closed system to completely symbolize itself, as posited by both Godel and Russell in mathematics.
The inability of progressives to handle anything more than simple, first-order systems and plodding first-order logic is ubiquitous and provides a revealing caricature of poor cognitive skills. Couple this with their sanctimonious preening about their ostensibly vaunted intellectual superiority, and you are left with the inescapable conclusion that progressives are progressives because they are genetically too stupid to understand anything more complex.
The more I see of progressives, the more I subscribe to some sort of means testing for voting and office-holding, i.e, those too ignorant or stupid should not be allowed to vote.
When the federal government gave GM that money, it took the money from you and me. Even supposing that GM really pays it back, it won’t go back to you or me; it will go to the federal government. That smells like a giant tax to me. Just because you don’t have any plans for your money doesn’t mean that taking cheap shots at the Tea Party makes any sense at all.
David,
There is no “saving an industry” involved in the Chrysler and GM bailouts other than the Union “industry”.
The demand for cars in the US would not change with who makes the cars. The cars would come from someone else, like Ford, or from other automakers with manufacturing plants in the US. Another US manufacturer might even buy the GM plants or equipment and put those assets to use, for a fair price.
They would increase production to meet the demand. They would hire. They would buy from the jilted suppliers, if those suppliers had good products and could adapt. The assets, workers, capital would shift from the unproductive, failed companies to the productive, successful companies. The invisible hand works. Capitalism works. It is best aligned with the better parts of human nature (as detailed in this article).
Your second point, about lost “services provided to its employees” of the failed automakers belies the fallacy that a company exists to be a jobs program. A firm exists to make a profit. A job is a job. When you lose one, you get another one, commensurate with your skills and abilities. When you find another job, you spend money again.
Please don’t subscribe to Pelosi’s logic that Unemployment checks generate jobs.
Another virtue of capitalism is that it works through voluntary cooperation.
Socialism works through top down control.
Those who succeed under capitalism are those who are best able to cooperate with their fellow men. Under capitalism, those who are caught lying are expelled from the system.
Those who succeed under socialism are those who are most adept at playing politics. Under socialism, lying to get what you want works.
you guys have a great idea. let GM fail and tens of thousands go out of work.
Briliant.
The apparent bottomless well of ignorance from which you operate is the profile, imho, of the Obama supporter/voter. It’s like Grandma told me when I was about 13 or so. “Ignorant or stupid people don’t know they’re ignorant or stupid. We must allow for that in our dealings with them.”
Miriam, why is it that you routinely show yourself to be a bottomless pit of ignorance?
1) Do you honestly believe that all companies on the verge of bankruptcy should be bailed out? Or only the heavily unionized ones.
2) As others have pointed out, when GM stops making cars, other automakers will pick up the slack and as a result, their employment will go up.
Hey Miriam,
Two years ago when gas hit $4 a gallon I had to shut down my business because of the $1,000 a month fuel bill that was eating my profits. Where’s MY bail out?
Oh yeah, I had one employee — me, no unions and no liberal navel lint.
Patrick
you, Markthegreat and stephen have an excellent point.
In order for a job to add to the economy, it has to be producing a product/service at a profit. Subsidies, bailouts, and propping up failed companies have costs, and those costs causes job losses elsewhere.
So by your logic, the government should have taken over Studebaker, Hudson, Olds, Plymouth, and a host of others to save those companies and their “irreplaceable” jobs.
ALL unions should be de-certified.
And their officers jailed.
And their bank accounts seized as the fruit(s) of illegal activities.
“For example, with the passing of ObamaCare, others will now decide if we, as patients, are worth the cost of an MRI, a specialist’s time, or even a life-saving drug regimen.”
When the budget is busted for Obamacare the mantra will be “make sure you get sick before the money runs out” Every claim they’ve made about cost is calculated fabrication.
David,
There will be a demand for cars for quite some time.
Unions on the other hand make demands.
Lech Waleska made the statement: “A union should not become a parasite that sucks the life out of it’s host”
I guess the UAW wasn’t listening.
As far as your third world country crack goes, if you let enough unions suck the life out of their hosts we’ll have exactly that.
Thank you, Amit, for a great essay! It nicely highlights the fundamental difference between socialism and capitalism and explains *why* socialism is wrong at the practical and core philosophical levels.
As we prepare to enjoy the July 4 weekend, I hope Americans reflect on what made this country great and how to keep it that way. Amit’s essay would make for great conversational fodder around the barbecue grill and family picnic tables.
Trying to capsulate the damage that unions did to the Auto industry to anyone that is in a union is like talking to a wall. The brain-washing that has occured within the union culture is scary. History of unions and it affiliation with socialism and communism dosen’t end well for unions. Lenin and Stalin used coined the phrase “useful idiots”, the the idiots have fulfilled their use, they are the first to face the “fireing squads” That is a historic fact.
I like GM cars, I will continue to buy them. I hope a lot of people do so that GM stock can be offered up to the public very soon and the company thrives without a nanny. I admit that GM was fairly brain dead for years, but I think that has changed. GM (and Ford and Chrysler) had legacy issues that the foreign firms didn’t have to face – that’s a fact. Ford went into restructuring and streamlining years ahead of GM. They are reaping the rewards, making and selling some pretty darn nice cars. GM will get there too. Not so sure about Chysler???
Why do you think that GM will do anything to restructure? They have a bottomless pit of funding in the American taxpayer now.
As noted in the article, I am a part owner of GM. But my ownership share is so small that I have no reason to not boycott the brand. Therefore, I will never buy a GM product again.
This article does a great job of showing some insight into why socialism necessarily fails. It isn’t because it simply doesn’t work, but there is a deeper ethical issue involved…Man and his individual rights as given by his nature. Nice work, keep it up.
I understand the gubment wants to make a public offering GM stock. Based on the bed wetting reports from this regimes economists, does anyone believe the financial reports will be clean?
Why is it I see so much concern for autoworkers who might have been put out of work in the thousands, but none shown for the oil rig workers put out of work in the TENS OF THOUSANDS by the drilling moratorium in the gulf? Hypocrites.
Marvelous op-ed by Amit Ghate pointing out the key moral and practical advantages of capitalism. Frankly, that’s one of the things I love most about capitalism. For the most part, everybody gets to mind their own business and succeed or fail based not on government favors but private ability and initiative.
The alternative to letting GM fail is supposed to be a government take-over. What does the government know that GM doesn’t? What secret ingredient does the government have that enables them to avoid the dismissal of thousands of workers? The answer is you and your wallet. As long as you are willing to pay for it GM can go on forever like the Soviet auto companies. Has anyone bought a Zil(ch) lately?
The last vehicle I purchased was a Chevy pickup. That was in 2002. That was the last GM vehicle I will ever purchase. The truck has now gone over 200,000 miles and has had a boatload of maintenance performed on it. I won’t take it to the local GM dealer for service any more. Now I take to local independent wrenches who will do the work for considerably less. Non-union shops. Imagine that. The truck is long in the tooth and growing tired, but I keep it because it’s paid for. No more GMAC financing for me either. Ever. I won’t even buy OEM parts for it any longer, if I can help it. Amazing the bargains that can be had at local junk yards and, for as long as it exists before Dear Leader pulls the plug in it, the Internet.
The point of all this is that I will not willingly assist in the destruction of the free market, which doing business with Government Motors entails.
I am now making payments to myself on the new truck I will purchase when I have the requisite cash in hand. I am seasonably sure I can keep the old Chevy limping along until then. My next truck will either be a Ford or a Toyota. Probably Toyota, so I don’t enrich the UAW. Sorry, people of Detroit, but you crapped in your own mess kit.
It’s a pity, really. That Chevy was a pretty good truck.
I will never buy another union made product if I can help it. I will judiciously check the workforce for any automobile I purchase and if the united auto workers are involved I will go to another brand. The union scale vs the non union scale is huge. The product produced by the union shop is not better just more expensive. The union people refused to accept concessions to save their company. If they are not willing to sacrifice for their own well being I see no reason that myself and others should do so either. I used to live in an area that is now known as the rust belt. Unions were everywhere the area was a closed shop area in that union membership was mandatory. The population of my former town is now approx. 25% of what it was. Disaster is what you get when you combine unions with liberal policy makers in government. You can forget the greedy capitalist argument as if the entities were able to produce a profit they would still be there. Union labor and stupid left leaning tax and spend politicians put them out of business. When the businesses closed union guys lost their jobs but so did a lot of nonunion folks that had family businesses or were employed there. If you look around the United States of America you will find that in tough times the places that are still functioning are right to work, low taxes, and conservative politically. That should be something even the most idiotic liberal mind could grasp if it were to ever open and then think instead of behaving like an amoeba.
Anybody else see the hypocracy in the left? With one hand they bail out GM to save the Union jobs, while with the other hand they push the global warming mantra and try to shut down the auto industry altogether. So what do all the Democrat union members think is going to happen to their manufacturing jobs when their buddies on the left get everything they want?
Another major factor in differentiating between socialism and free enterprise leading to the inevitable success of the latter, is the concept of ‘earned success’. For a good essay on this, see
http://article.nationalreview.com/435331/happy-now/arthur-c-brooks?page=1
Thank you for a great observation.
Laissez-faire capitalism, indeed. It’s the only way.
When do we get to fight for it?
In civilized countries you get to fight for it in the voting booth. So far, that has proven difficult for your demographic. You just don’t have the numbers, and those numbers will only get worse as time goes on. Progressives just have to wait you out as you die off. Tick, tock, tick, tock. It’s gonna be a rough eight-years for you people (i.e. fascists).
You are aware that fascism is a form of socialism.
Regardless, you concern is noted.
Under the Obama Administration, The Feds now control 60-70 % of the economy. Careful who you call a Fascist.
BTW, I”m with most readers here, I’ll never buy another GM product. In fact, I’ll never buy another GE product either.
GM was not left to any risk for the same reason Chrysler was not allowed too in 1980, the US military depends on these companies for critical components in vehicles and research programs.
The US defense industry is already under pressure due to losses in skilled manufacturing, if GM were to be placed at risk of any kind, it could affect the defense Supply chain.
This is of course the fault of the way the Defense industry operates, which is just like the banking system; these companies have been allowed to become too big and important to fail, no matter how badly they are managed.
Every GM vehicle I’ve owned in my life was junk at 100K miles. I now drive a foreign made vehicle that has almost 150K miles, and it’s still going strong.
Remember the story of the wealthy emperor who came upon the beggar. The emperor said, “What can I do for you?” The beggar replied, “Oh nothing, I’m fine.” Undaunted, the emperor pressed on, “No, really, name it and it shall be yours.” At which point, the beggar held up his food bowl and said, “I’d like my bowl filled.” The emperor then poured money, gold & riches into the bowl, but it did not fill. He then retrieved jewels from his castle, returned and poured them into the bowl, but still, the bowl remained unfilled. The emperor, not to be defeated, continued his attempts to fill the bowl, with all his hoard of wealth, but still the bowl remained unfilled until finally the emperor had nothing left. He then asked the beggar, “How is it this bowl can never be filled?” The beggar replied, “Because, emperor, it represents human desire.”
As long as the unions continue to hold up their bowl, and the taxpayers attempt to fill it, it will never be filled. It’s time to stop the madness of trying to fill the unions’ food bowl, b/c it can never happen.
“For when property is socialized, as it was in the GM bailout, it’s “owned” by all of us, and therefore we must all be consulted for every question of use, however trivial. What qualifies us to decide? Simply being a member of society. True, we’ve had no hand in creating the property, we don’t necessarily know anything about it, and the impact of its use is at best very tenuously related to us.”
Actually we did have a hand in “creating the property” of late, inasmuch without your money and my money, they would have ceased to exist.
So, Allston, how did the fact that I once inherited an ill-fated ’74 vega somehow create responsibility on my part for the further misfortunes of General Motors. You are very quick to include everyone in “we”. You and I are not we when in comes to bailing out GM.
Spin
In 1976, the federal government took over a number of bankrupt northeastern railroads and formed Conrail, pumped billions into it and did the Staggers Act to deregulate. Later, Conrail did an IPO I believe, was quite profitable and was later acquired and split by two other railroads. This seems to me a rare example of the government bailing something out and getting it right. It would be interesting to see a comparison of the Conrail situation with the GM situation…
Obamacare Lies Exposed
Like an insidious, terminal disease that invaded and is now slowly spreading throughout America’s body politic, the evil thing that is Obamacare is inexorably revealing itself for what it is and for what it was intended to be all along, in sum a pernicious usurpation of basic American rights and a government power grab and socialization of one-seventh of America’s economy.
First, they came for the auto industry, then they came for the health industry, now they’re coming for the financial industry. When Obama and Company are through with their seizures of vital sectors of American life, there will be nothing recognizable remaining.
Those millions of us who saw the deceptions, misrepresentations, and outright lies used during the grand and prolonged pitch for Obamacare aren’t to be applauded, just listened to next time!
Examples of Obamian now-exposed subterfuges:
(Read more at http://www.genelalor.com/blog1/?p=1794)