The GM Bailout

1. Locke, Smith and Marx would evaluate the events of this case in the following manner.

GM applying for money out of the TARP fundss

Locke would believe GM (owners) have a right to property, but at the same time each
individual is allowed to dispose of what they own however they see fit, without
government interference. If the company is suffering from huge losses because the
owners didn’t act responsibly, they have no right to ask for the government’s help.

Smith would disagree with the fact that GM asks for money from the U.S. government.
Smith believes interventions into the market by government are undesirable and that
human planners cannot allocate resources as efficiently as the “invisible hand” of the
market.

Marx would also disagree with the fact that GM (investors) ask for money from the U.S.
Government (citizens). The fact that the investors already spend the money on shares,
lost the money and are now asking for new money to cover up their losses is against the
idea of a fair distribution of wealth. In this case the bourgeoisie suppresses the
proletarians and Marx wants to free the proletarians. He was against the idea of social
hierarchy.

The U.S government approves the loan money out of the TARP funds

Locke believes the right of freedom and property is violated, because the tax payers did
not agree with GM borrowing money from the government. The bill didn’t pass the
senate, so it’s indeed a violation of both rights.

Smith would disagree with the fact that the U.S. government approves the loan out of the
TARP funds. This is because he too believes the right of freedom and property is
violated, because the tax payers did not agree with GM borrowing money from the
government and it is conflicting with the whole idea of the American economic system
which he supports. Smith believes in the invisible hand theory which states that markets
will heal themselves. Companies fall while others are rising and this is all part of a well-
functioning economy.

Marx would be conflicting in opinion. On the one hand the U.S. Government uses tax
money to save the bourgeois company. On the other hand proletarian workers are saved
from unemployment. In socialism government is obliged to provide a job for each
citizen. There is no unemployment.

The U.S. Government owning 61% of the shares of GM

 The fact that the U.S. Government owns 61% of GM shares violates Locke’s theory.
Locke would state that the right of property is violated because the government took it
away from the investors. The right of property is important in his theory.

Smith would again disagree with the fact that the U.S. government owns 61% of GM’s
shares. Governments should not interfere in economic systems and should not own any
part of a company.

Marx would approve of this but he would prefer to see the government owning100% of
the shares. Marx believes that property should be owned by the people and not by the
private few. Since 10% of the shares are still left with the old shareholders, Marx would
see this as an oppression of the proletarians by the bourgeoisie.

2. The ideologies implied by the statements signed are that moving the free market based
economy is a dangerous step closer towards socialism. Socialism is characterized and defined
by government ownership/control of capital or a forced pooling and redistribution of wealth.

3. I believe that the bailout should have been done. The costs to society are likely to be higher
without the bailout than with the bailout. Without the bailout GM would not have been able to
borrow money from the banks and it would have gone bankrupt. GM employs more than
200,000 workers and finances more than 400,000 retirees. As such its bankruptcy would
directly harm millions of people. It may also seriously distress the stock market and economy as
a whole. Moreover, GM has been a largely profitable company for many years. If the company
can reorganize itself, the government may start earning a profit in the future.

I believe the bailout was mostly ethical in terms of utilitarianism because it focused on
maximizing the overall good; the good of others as well as the good of one’s self.

Justice (looks how benefits and burdens are distributed among people) is not ethical because the
managers of GM were allowed to enjoy its profits during its healthy years while the taxpayers
have to bear the losses. As economist Joseph Stiglitz states, “The profits are privatized and
losses are socialized.” It is also not ethical from a retributive justice viewpoint because the
managers are not held responsible for the wrong decisions they have made, for example the
choice to lock GM into the SUV market.

Rights (looks at individual entitlements to freedom of choice and well-being) is not ethical
because government money is the citizens’ money; their right of freedom of choice may be
violated here because the citizens cannot choose whether to bailout GM or not. In this sense, the
bailout is not ethical in terms of rights. However, the bailout may defend the rights of well-
being of GM’s employee’s as they can maintain their salary which would be ethical.
Caring about the employees or people who are otherwise dependent on GM the bailout seems
ethical. However, when caring about citizens in general it may not be ethical because the profits
of GM were not redistributed to citizens either.

3. In your judgment, was it good or bad for the government to take ownership of 61% of
GM? Explain why or why not in terms of theories of Locke, Smith, and Marx.
I think it is wise to say that it is better for the government to take 61% of GM, which make
the government take the most control over the company. Because with the government
intervention, it could avoid free market monopoly which means the government holds highly
as regulator of the market. The government is also help the company financially and since it
was the government the finance could be more stable rather than being held by a certain
company or public.