More State Capitalist Duplicity

Economics — Posted by Donald P. Goodman III on April 28, 2010 6:53 AM

Swimmingly, we’re told. Indeed, Ed Whitacre, CEO of what is still euphemistically called the private corporation of General Motors, has been bragging about GM’s many accomplishments this past year or two. He notes that many people didn’t want to give “GM a second chance,” which seems an odd way of referring to bulldozing boatloads of public funds into a corporation dedicated to private profit. But Mr. Whitacre proceeds further, justifying this public largess by arguing that GM has paid back its full loan, with interest, five years early. (This bold claim occurs at 0:15.) Mr. Whitacre then states, “But there is still more to do.”

He’s absolutely right, of course. Not about the paying the government loan back; that’s a deliberate deception, though the shenanigans GM played with public dollars do make it fall short (just short) of a bald-faced lie. He’s right about there being still more to do. Specifically, paying back most of the fifty billion dollars poured into GM’s trough in 2008. Not to mention, of course, the more than eight billion dollars generously donated by the Canadian government.

GM, see, received nearly fifty billion dollars ($49.5 billion, more precisely) from the American government in 2008. Of that, precisely $6.7 billion was an actual loan, which required paying back with interest. (7%, which is apparently an extremely generous, to GM, interest rate given the enormous risk of investing in GM at the time.) The rest was a purchase of stock, stock which was worth practically nothing at the time; in other words, the rest was a gift. GM has paid back the $6.7 billion loan; the rest of the $49.5 billion remains in its coffers, still a gift from the public to the already rich.

That alone makes Mr. Whitacre’s claim a bit deceptive; he makes it sound as though the taxpayer’s been made whole, which he clearly hasn’t. But it gets even better. GM didn’t pay this $6.7 billion dollars back from its own earnings; indeed, GM hasn’t posted a profit since 2004, even with all the bailout money we’ve given it. No, GM paid back its government loan with—wait for it—its government gift!

Let me explain. $13.4 billion of the bailout money was put into an escrow account for GM. GM paid back the loan from this money. In other words, GM paid the public back part of its bailout by using another part of its bailout. Brilliant; only twenty-first century capitalism could possibly analyze this and call it a free and fair loan repayment.

But, just when we all thought it couldn’t, it gets even better. GM has recently applied for another government loan, this time from the Department of Energy. This loan will have only a 5% interest rate, much lower than that of the TARP loan. So GM paid back the government with government funds in order to get more government money at a lower interest rate. Score: GM 50 billion, public -50 billion. Not counting, of course, the new loan from the Department of Energy.

The whole sordid scheme is well-known and well-demonstrated, despite the media’s persistent parroting of Mr. Whitacre’s line.

So what can a Distributist draw from this comedy of errors? Quite simply, we can note that this proves us right.

Belloc noted nearly a century ago in The Servile State that capitalism inevitably either devolves into socialism or collapses under its own weight. It took longer than he expected, but we’re on the cusp of one or the other right now. When productive property is concentrated entirely or almost entirely in the hands of the few, and the many are simply laborers on that productive property (in other words, a proletariat, whether white- or blue-collar), those owners of productive property become extremely powerful. They become so powerful, in fact, that the government comes to serve them, rather than the public. That’s exactly what happened with our bailout, and what happens daily with our regulations and even our culture. The extent of this ownership of our government by wealthy, private interests has been more extensively explored elsewhere, and in the end it’s undeniable. How long until, as John Médaille facetiously but possibly presciently quipped, “politician[s] [are] required to begin and end each speech with the statement ‘This message brought to you by …’ and list the names of his three top contributors?”

The capitalists, those few owners of productive property, own our society, and they will not give that up just because one of their own was caught in a clear deception on national television. Indeed, that deception is still being aired on the networks on a nightly basis, despite its being thoroughly and publicly revealed as such. No, they will continue as they are, secure in their knowledge of their ownership of America.

So insurance companies will rejoice in legislation that requires everyone to buy their plans while offering no real competition to them. Goldman Sachs will support Wall Street reform, because they know that in the end it will only benefit them. Goldman Sachs is the government; so are the insurance companies. The government is bought and paid for; we live in a plutocracy.

As distributists, we cannot let this continue unabated; we must oppose it from start to finish. But let’s not just continue to address the symptoms; we must address the disease. The disease is the concentration of productive property in the hands of the few, while the many are consigned to remain proletarians; that is, the disease is capitalism itself. Only when property is so widely distributed that society as a whole takes on the character of owners rather than of non-owning workers will the plutocracy end.

Praise be to Christ the King!

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Tags: Donald Goodman, General Motors, Goldman Sachs, Regulation, Wall Street