Thursday, June 4, 2009

Socialism Then vs. Socialism Now for General Motors


Maybe Karl Marx was right about the inevitability of socialism, even if he got the exact mechanisms wrong.

Today many are decrying the government takeover of General Motors as "socialist." It's ironic, then, that it was a similarly knee-jerk aversion to "socialism" that, long ago, helped land Detroit's automakers in their present state.

From Roger Lowenstein's book, "While America Aged: How Pension Debts Ruined General Motors, Stopped the NYC Subways, Bankrupted San Diego, and Loom as the Next Financial Crisis" (p. 22-23):

G.M. had been forced to put up with government quotas, price controls, and meddling by the Labor Board during the war and its aftermath; now the company was anxious to return to normalcy, which the executives defined as operating its business with a free hand. [Alfred] Sloan, who had retired from day-to-day management but was still presiding as chairman, feared that expanding the federal welfare state would further, and perhaps irretrievably, entangle his company in the maws of government.

Looking across the Atlantic, welfare states were already emerging in Europe. Between the end of the war and 1948, the British government took over the country's coal mines, railroads, and gas and electric companies, all with rather little ado. The French leader General Charles de Gaulle nationalized Renault, France's leading automaker. In speeches and interviews, [Charlie] Wilson, an engineer like Sloan but 15 years younger and less parochial in his world view, argued that American industry and labor should work through their issues rather than submit to takeovers by the state — what Wilson termed "the philosophy of class conflict from Europe." The fear of creeping statism was very real. As Business Week warned, "British socialism seems a closer threat than Russian communism."

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