Battle4Liberty

Several weeks ago President Obama told us that he wanted to do for the rest of the country in hi second term what he did for GM and the auto industry in his first term. Indeed, a close inspection of Washington’s intervention into the auto industry can tell us a lot about his economic worldview.

When Obama was elected President, GM was headed for bankruptcy. It was not facing imminent dissolution, however, and was not in need of a savior. Rather, GM needed bankruptcy protection to facilitate the type of real, long-term reorganization required to make it (truly) profitable again. Instead of allowing this tested and established process to take place, the President stepped in with billions of taxpayer funds to “rescue” GM in the ostensible interest of jobs and economic prosperity. At the time, he claimed that GM was a special case and that this type of economic intervention was the exception, not the rule.

The details surrounding GM are well chronicled. Suffice to say that after redistributing a significant chunk of the firm’s ownership to the UAW, the Obama administration has done all it can to prop up the behemoth. From the original “loan” that will never be fully repaid, to a cash-for-clunkers program that subsidized new car purchases, to long-term tax credits against future GM profits, to a $7500 consumer tax credit for Americans who buy a Volt, Obama’s is committed to “success” at GM at any cost. He’s even pressing to increase the tax credit to $10,000.

But how has GM fared since the bailout? The firm has cut jobs in the US, and according to its own projections, most new production jobs will be created in other countries. Chevy Volts are not selling as well as originally hyped. Quality concerns—including the battery fires—and a hefty price tag in excess of 40K have taken a toll. The company recently halted production to avoid a glut at dealerships and Reuters even reported that GM spends $89K to produce each Volt. While the actual figure might be a bit lower, the Volt is clearly a losing proposition made to appear viable by a massive influx of taxpayer subsidies. As I stated in 2009, GM will “succeed” as long as Obama is in office. There’s too much at stake politically for it to be allowed to fail, and Washington has the power of the printing press to ensure that it never runs short on cash.

So what does the GM experience tell us about Obama’s economic worldview? In general, there are 2 fundamental economic visions. Capitalism—or free enterprise—respects the rights of individuals to engage in business as producers, consumers, or laborers, as they see fit. Marxism—or socialism—rejects a strong affirmation of personal property rights (except for the ruling elite) and seeks to overcome the alleged inequalities rendered by free enterprise through central economic planning. Capitalists need a small, but effective government to protect individual liberty. Socialists need a large, intrusive government to protect people from themselves.

While President Obama is not a pure Marxist, his economic philosophy clearly leans in that direction. But the GM experience gives us a deeper insight. The President departs from pure Marxism by recognizing the need for a productive private sector. In a socialist nation, the government owns and is responsible for all means of production. President Obama does not want that responsibility, at least not in all industries. Moreover, he needs a private sector—big pharma, the oil producers, evil bankers, and the like—to blame for the economic ills his heavy-handed intervention creates.

But the President’s worldview is tainted with fascism as well. Whereas Marxists control production directly by taking it over from the private sector, fascists control it indirectly through heavy regulation. Under fascism, private enterprises are “free” to operate as long as they take their cues from government. The same leaders who seek political gain by associating business with greed and excess also promote programs that benefit those that “partner” with government “voluntarily.” This soft form of fascism is commonly called crony capitalism. If widespread, it takes a heavy toll on the economy, as we have already seen.

To be fair, Romney and the Republicans have dabbled with both soft socialism and soft Marxism as well. That’s a topic for another day, although it’s safe to say that the President is operating on an entirely different level. The key point here, as the GM experience teaches us, is that President Obama is not merely seeking to sand off the alleged rough edges of capitalism. He is seeking a complete transformation of the economy, just as he promised.