Welcome to a Fascist….er, Managed Democracy?

by Tom Palmer on March 29, 2009

GM chairman to leave US car maker

The chief executive and chairman of troubled US car maker General Motors will step down at once, at the request of Barack Obama.

I was so happy to see the back of George W. Bush and his administration, with their disregard for the Constitution, foolish and unnecessary war, attempt to subvert habeas corpus, reckless spending, and overall arrogance and disregard for limits on power. His successor has decided to follow even more carefully the examples set by Benito Mussolini and Vladimir Putin, and has sacked the head of a company. That is a decision for the shareholders of a private firm to make, not for the head of state. What next? Will private firms end up in the hands of friends of the president? Will the White House Chief of Staff serve simultaneously as head of a major state-directed company? Will journalists who criticize the president end up shot in the head in elevators?

Bankruptcy would have allowed for new management to replace the incompetent management at GM. Instead we get bailouts, corruption, cronyism, and the public arrogance of a man who wields coercive power — the power to jail and kill — thinking he knows best how to manage a car company. How utterly disgusting.

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March 31, 2009 at 3:35 am

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abc March 29, 2009 at 9:15 pm

I’m not sure how we get from 1) government demands the removal of a CEO in exchange for further public funds to 2) journalists shot in the back of the head.

Given, as you say, that bankruptcy judges have all sorts of powers to require the removal of management in exchange for government protection during restructuring and reordering of creditors rights – and that’s been a standard part of bankruptcy for 30 years – how do we suddenly get to fascism?

But, hey, some might think government mandated and supervised savings accounts – some call it social security “privatization” – in lieu of social security is fascistic.

Tom G. Palmer March 29, 2009 at 10:13 pm

A bankruptcy judge and a president exercising personal discretion to demand the resignation of an employee of a private firm are two very, very different matters. There is no connection. I suspect that the CEO and much of the management team at GM would have been replaced under bankruptcy, but not because of a decree from the president.

When one man wields that much power, expect accelerating corruption of the political system and the degradation of the rule of law.

Lastly, moving from A) the state forcing people to contribute to a giant ponzi scheme and creating enormous unfunded liabilities on which people are encouraged to rely, to B) a system in which the state still coerces people, not to contribute to a ponzi scheme, nor to rely on its beneficence, but to save and invest for the future, is an improvement. It isn’t ideal, but it’s a move away from systematic coercion, not toward it. For the same reason, the substitution of money taxes for forced labor was a move toward greater freedom. A system of broad-based taxes is more consistent with liberty than a system of selective compulsory labor, such as the corvée system that Turgot abolished and replaced with taxes. In neither case do people enjoy 100% of that to which they are entitled, but they do enjoy more of it, rather than less. Anyone who doesn’t understand that isn’t using his brain.

OVD March 30, 2009 at 2:03 am

I think that Tom refers to what happens to people who expose the cronyism and the corruption in high levels in the siloviki who are running Russian state. It is one way the cronyist state perpetuates.

abc March 30, 2009 at 2:25 pm

“Anyone who doesn’t understand that isn’t using his brain.”

I understand the claim; I don’t agree with it. So, like Tyler Cowen, I must not be using my brain. Can you imagine, however bad recent government bailouts have been, how much worse the government march through the private sector would’ve been had tens of millions of Americans had lost 40 or 50 percent in their government mandated savings accounts under the Cato plan in the recent market collapse?

This isn’t meant to bash Cato, but rather to ask, what is fascism? The Cato plan seems at least as fascistic as the government requiring ineffective executives step aside in exchange for public funds.

Also, I don’t think the president has used his “personal” discretion in the sense you intend. This apparently was recommended to him by whatever committee of experts he assembled.

Adam Allouba March 30, 2009 at 6:55 pm

“The Cato plan seems at least as fascistic as the government requiring ineffective executives step aside in exchange for public funds. ”

You seem to be using the word fascist in the sense of “something I don’t like.” The state deciding who runs corporations that are private in name only is literally fascist (i.e. this is exactly how fascism operated). There are other, crucial, differences between fascism and the US government. The more power that amasses in the White House, however, the more likely the US is to move towards Mussolini-style government.

As far as private retirement savings go, what aspect of fascism do they emulate (as an alternative to social security)? The state forcing private citizens to save money is authoritarian, but it is, by definition, less so than forcing private citizens to pay into a state-run pool of money.

Incidentally, you claim that the bailouts would be worse if Americans had seen their retirement savings plunge over the last six months. If you mean politically, you’re probably right. However, your question implies that you think that because the US has social security rather than private accounts, “savings” (if you can use that term for a Ponzi scheme) have been protected. They haven’t. The economy’s decline is what it is; the government can’t pass a law to reverse it. The only difference is that under a private system, we’d all know that now and could plan accordingly. Under this system, people think their payments are guaranteed. They’re going to get a hell of a shock in 30 years when there’s no money in the kitty to pay them.

Tom G. Palmer March 30, 2009 at 7:46 pm

I think that Adam has hit several nails on the head.

Our savings have been drained of value because of the enormous unfunded liabilities that the state has amassed. If private savings had been put into investments, rather than Social Security’s pay-as-you-go system, with the surplus of income over outgo going 100% into government bonds, i.e., promises to pay out of future revenues, there would have been greater economic growth. Ponzi schemes are not investments. They do not generate actual increases in wealth. At best, they just take it from one pocket and put it in another. In contrast, investments in the real economy generate wealth.

What we have seen is a huge amount of state intervention to encourage risky behavior in the mortgage-backed-securities market, in order to encourage more home building and purchases than the market, left to itself, would have borne. An orgy of credit and financing promoted quite deliberately by the state. That is not a free market. And now we are paying the price for it.

But to return to what I found so shocking, the president made the decision to fire the head of a private firm. And that, my friend, is definitely a feature of Fascism. Whether he asked some “experts” he appointed is irrelevant. It is a gross departure from the fundamental principles of the rule of law. It is not as shocking as decisions to waive bans on torture or to try to throw habeas corpus into the trash, decisions that were also made by the president after consulting with the “experts” he appointed. But it is disgusting, nonetheless.

Charles N. Steele March 30, 2009 at 10:40 pm

Tom is correct that this is fascism. “abc’s” rejoinder that it wasn’t Obama’s personal discretion because he was influenced by advisors is absurd.

Adam is correct about social security. It would be better to have a stock portfolio that had lost 60% of its value than our social security promises which are utterly unpayable, and can be paid only to the extent that future generations are taxed.

OTOH, who cares? Since now cars are going to be heavily subsidized by govt, we can each have a new one which should make for wonderful housing accomodations.

abc March 31, 2009 at 10:43 am

Our savings have been drained of value because of the enormous unfunded liabilities that the state has amassed. If private savings had been put into investments, rather than Social Security’s pay-as-you-go system, with the surplus of income over outgo going 100% into government bonds, i.e., promises to pay out of future revenues, there would have been greater economic growth.

But that’s not what the Cato plan was. The Cato plan was forced government savings in equities and bonds. So we all agree that Social Security is a joke. But my criticism is that the Cato plan would’ve basically nationalized the equities market with ready-made government bureaucrats eager to leap in as stock prices fell. It would’ve been catastrophic, as if the past 6 months have not been.

As to our current crisis: what we’ve seen are a whole host of government interventions: Fannie Mae, Freddie Mac, Fed easing of credit, the tax code’s mortgage interest deduction, the Bankruptcy code’s favorable treatment of home loan creditors, the CRA, and on and on produce a mammoth housing bubble that rippled through the economy.

But each state action contributed to the problem, just as had we had state mandated “private” retirement accounts, we would’ve had those distortions in the market as well.

GM should’ve gone bankrupt. And Chrysler, and AIG, and B of A, and Wells Fargo, Wachovia, and all the other phoney baloney companies that are a feature of late stage American capitalism. So I agree. In that world, Obama wouldn’t have had to fire Rick Waggoner.

But, given where we are, I just wondered why this particular event was a sign of fascism when, say the 1979 loan to Chrysler was not. And how that led to journalists being shot in the back of the head.

I will note that it’s almost quaint that Congress actually voted on a bailout for Chrysler in 1979. Ahh, good times.

Tom G. Palmer March 31, 2009 at 10:55 am

You should check things before you write. Cato offered a menu of options, all of which entailed allowing expansion of the current IRA-type savings plans, in which individuals invest in the market and own their investments. Rather than being forced to “invest” one’s money in the state’s gigantic IOU, people would have had the option, in exchange for relinquishing claims to that gigantic IOU, to direct their funds to individually capitalized and owned investments, as they can currently with IRAs, 401(k)s, and other investment vehicles. No analysts proposed “forced government savings in equities and bonds.” That, indeed, would have been a terrible proposal. It is clear that you did not read the various proposals. IRA investments are not “forced government savings in equities and bonds.” Moreover, stock prices have fallen and IRAs have fallen in value. Your scenario did not come to pass.

The Chrysler bailout was terrible. I opposed it. As terrible that was, the president did not, at that time, personally order that the CEO of Chrysler be fired. That is a major difference.

Kent Guida March 31, 2009 at 4:14 pm

Tom,
Do you have any thoughts on the analysis presented in last year’s book, Liberal Fascism, in relation to what is going on under Obama? Or the many similar treatments published over many decades? Don’t you think what we are seeing now was rather predictable given Obama’s history, associations and rhetoric, not to mention the 100-year history of progressivism and fascism?
Basically, what I’m asking is, why is anyone surprised at any of this?
Best regards,
Kent Guida

Yehudit March 31, 2009 at 5:22 pm

I was going to write about Obama’s history and why is anyone surprised but Kent beat me to it. Once he won of course I hoped he would not govern according to his education, employment history, and past associations, but … he does, and this is what it looks like.

I am glad people are willing to risk accusations of hyperbole to talk about fascism, the economic system. I do think Goldberg’s book helped make that discussion possible.

John Tillinghast March 31, 2009 at 5:25 pm

Tom,

I’m afraid I also don’t see the fascist connection. It seems like a bad precedent on some level, but I just don’t see the connection to a long-term trend to fascism.
Your alarmed tone makes me wonder if this is actually a much worse sign than it sounds like to me. I think of things in my own life which, in retrospect, were clearly harbingers of Big Trouble, but at the time (with less experience) I didn’t think that much about them.
You sound as though you have “recognized” something that scares the hell out of you. I don’t know if you’re right or wrong, but a fuller explanation, with historical examples, might be worth a short article (or blog post, or comment).

Tom G. Palmer April 5, 2009 at 5:36 pm

Sorry it’s taken a while to respond. I’ve been very busy and today had to leave a conference (all in Portuguese, which I don’t understand well enough to benefit from greatly, anyway) because I was shattered and had to sleep another 10 hours.

I am really alarmed by what is happening. It may have been predictable (ok, it was), but when you turn that corner, take that step, turn that page it is still a shock. When the President takes it upon himself personally to fire the head of a nominally private firm, you know you have left the realm of independent civil society and the rule of law and entered the realm of arbitrary power. The republic is gone and the empire has begun. It is not merely a matter of the concentration of power in the state, which is bad enough. It is concentrated in the hands of one man. I really don’t understand why more people were not horrified and shocked by this. Perhaps they thought that it would show sympathy for a business executive who had come hat in hand to D.C. and found himself fired. I certainly have no sympathy for him. But I am shocked at this exercise of imperial authority. I recommend reading Tom Holland’s “Rubicon: The Triumph and Tragedy of the Roman Republic” (http://www.amazon.com/Rubicon-Triumph-Tragedy-Roman-Republic/dp/034911563X/ref=sr_1_1?ie=UTF8&s=books&qid=1238967385&sr=8-1 ) for some background.

Austrian April 8, 2009 at 3:20 am

I think the fascism connection is a bit of a stretch.
Just to remember what fascism really is: Gas chambers, SS death squads, mass executions et al

Tom G. Palmer April 8, 2009 at 7:46 am

Austrian, you are confusing “Fascism” with “National Socialism.” The Italian Fascist state became an ally of the German National Socialist state (having also been wooed by Britain and France), and so the two became entwined in popular imagination. The horrors you mention are not defining characteristics of Fascism (or even of “fascism”).

Austrian April 9, 2009 at 3:40 am

Tom, the Italian Fascist state was guilty of mass executions in northern and eastern Africa, Italy and in all the contries where their troups set foot on. To the dying days of WW 2 deaths squads of the Repubblica Sociale Italiana were butchering Italians. It’s no coincidence that Hitler modeled his cult on Mossulini’s fascism (Duce – Führer; Fascist Salute – Sieg Heil; Black Shirts – brown shirts etc etc).

My father, born in 1932 in Greece, was always quite outspoken about the difference between the Italian Fascists and the German ones: the latter were (alas) much more efficient. Otherwise very little difference. Though he thought that the Germans had more fun killing their “enemies” than the Italians.

To compare Obama with Mossulini or Hitler is a mistake (incidentally, in Italy the conservative Forza Italia and the fascists have merged a week ago to form a new right-wing party….).

As for GM: I think that the state should NOT have bailed out this company which has proved its inefficiency. Let it fail. However, if somebody provides money to a distressed entity it’s absolutely normal that the CEO of this company “agrees” to leave. As a lawyer, I have worked in quite a number of takeovers were private investors (usually private equity firms) agree to inject money in a failing company but, of course, demand the CEO to leave. Why should anybody (providing money) hold on to a CEO who has proven that he is not successful? Well, if such a guy does not want to have an insolvency under his watch (very bad for his future employment prospects), he will take the money and “agree” to leave. Of course, “voluntarily “. ;-)

Tom G. Palmer April 9, 2009 at 3:31 pm

Mussolini was a nasty character in a lot of ways. But so were others, too. The defining characteristics of fascism are not that the leaders arrange killings. If so, every murderous regime would be fascist.

I also did not compare Obama with Hitler. Please do pay attention to what I wrote. Nor did I call him a fascist. I said he has followed more closely the examples of Mussolini and Putin and sacked the CEO of a nominally private firm. That is cause for shock. The state is not just another “investor.” And to have a person who wields such enormous coercive power, as a president does, go around and decide on his own personal whim who may and may not be employed by a company is very, very disturbing.

I am rushing to finish some projects and get ready for my flight, or I would write more and provide more citations. I will do so after I’m back in the US.

Austrian April 9, 2009 at 4:58 pm

Tom, I think we agree on the basic premise that the bailout of the car industry was a mistake. However, we seem to have a somewhat different approach when describing the action of Obama: You make comparisons to Mussolini and Putin and I think this is wrong . It just works as a distraction – even among people who otherwise agree on the issue. A person who wants to discredit your main argument which is “the bailout is stupid / and the state should stay out of the private sector” will jump at this one point. If used in discussions with people sitting on the fence this decides the discussion as the person will only take one point home: “This guy compared Obama with a Fascist”.

As for the CEO’s sacking: If somebody provides money to a distressed company he will demand the resignation of its CEO. Always. Whether the investor is a private equity firm, a competitor or an entity under the influence of the state (eg sovereign wealth fund, state company etc). The shareholdes will never do the sacking as the CEO will be clever enough to “voluntarily” resign.

Wünsche einen guten Flug und nimm’s mir nicht übel, dass ich da was sagen mußte. Wie gesagt, im Kern hast Du recht. :-)

Tom G. Palmer April 10, 2009 at 7:34 pm

Austrian, I don’t agree with you on this. The concentration of power in the hands of a great leader is a step toward autocracy and when combined with such a strongly dirigiste approach to society, comparisons to Mussolini and Putin are appropriate.

I would recommend Wolfgang Schivelbusch’s “Three New Deals: Reflections on Roosevelt’s America, Mussolini’s Italy, and Hitler’s Germany, 1933-1939″
http://www.amazon.com/Three-New-Deals-Reflections-Roosevelts/dp/0312427433/ref=sr_1_4?ie=UTF8&s=books&qid=1239405897&sr=8-4

What shocks me is how few people are shocked by the president of the United States extending his personal authority to dismiss the employee of a private firm. That such things happen is one of the reasons to oppose such bailouts. I don’t take opposition to the bailout as a premise. It’s something that I oppose for a variety of reasons, among them that it leads to this kind of corruption of political and legal institutions, with more to follow. A reason to oppose the bailout is that it is a step toward autocracy. And it is frightening.

Austrian April 12, 2009 at 10:27 am

Jon Stewart takes an ironic view on the rightwing hysteria (especially given that the likes of Beck, Limbaugh and Backmann never were too troubled by Gitmo, the Patriot Act, secret torture camps etc):
http://www.thedailyshow.com/video/index.jhtml?videoId=223862&title=baracknophobia-obey

Tom, the German writer Schivelbusch you quote thinks that fascism is ruling in the US since Bush came to power. I am not sure whether he knows the true meaning of fascism……

FXR January 7, 2010 at 1:36 pm

Goldberg’s views are enlightening but well short of complete. Fascism is administered by the State on behalf of big business interests, to encourage mutual benefit.

Mussolini’s reference as “industrial socialism” describes a form of socialism where the wealthy control property, as opposed to ownership by the people. Industrial interests within America and Europe promoted Hitler and his healthiness mantra, because he offered no threat to them as a partner and a subservient to their wealth, which sustained his government.

Much as we see in what is referred to at the UN as “stakeholder partnerships” today. Initially connected to the feel good denormalization of smokers and the obese. Slated as making not normal the activities, but played out in real world activism, as making the people not normal. By promoted bigotry. HIA and EIA, training describe a live process, which corrects itself in a persistence, which never accepts defeat. The process promotes high-ground, but top down, lobbies, presenting themselves as “grass roots” movements, by huge international ad campaigns, into the virtuous voice of the people, and all dissenters, as always the bad guy in the room. HIA has proven entirely effective, in spite of the poorly disguised junk science on which it rests. EIA was introduced in an identical fashion supporting the same industrial line process, manufacturing acceptable facts.

Science and Engineering by consensus although oxymoronic, are encouraging virtually every major industrial interest, to partner with the World Health Organization [WHO] to “protect” [Or prevent] the citizenry, from making their own decisions, in how they organize their own wealth and recreations.

Governments don’t control fascism as imperialist dictators, they partner in symbiotic relationships with the wealthy. The industrial detente of power sharing, to cure whatever ails you, as long as you learn to live with the unspoken risks. For the greater good.

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