Conservatives Love Socialism… When it Comes to Socializing Their Losses

20081201-socialismConservatives claim to hate socialism. In most (if not all) cases, it’s because of one of two things:

  • They don’t actually understand what socialism really is, or
  • They mistakenly confuse socialism or socialist leaning policies for fascism, communism, and/or Leninism.

To be fair, these people shouldn’t be confused with well educated citizens, economists, and pundits who truly believe that Austrian based economic policies work better than Keynesian based ones. While I may disagree – and have discussed the reason why at length in at least one previous article – I honestly believe it’s important to distinguish between those who make an educated decision to support an economic ideology, and those who dislike something simply because they don’t really understand it.

With that being said, the truth is that conservatives actually love socialism. Especially when it’s financially beneficial for them – like when it comes to socializing their financial losses. In other words, when it comes to profits, any and all regulations, laws, and/or taxes that may decrease a company’s gains (even slightly) are “socialism run amok,” and are “anti-capitalist” and “un-American.” However, socializing losses via Chapter 11 bankruptcy is seen as a perfectly acceptable way for a company to save their failed business.

Before I delve into the latest example of this phenomenon, I should briefly describe what bankruptcy is and how it functions. Bankruptcy is a legal way for a debtor to obtain relief from debt, through either the discharge or restructuring of the debt. By definition, bankruptcy is always associated with financial loss. When a company’s outstanding debts exceed their profits, such that the company is no longer financially solvent and can no longer pay back their creditors, the creditors claims must somehow be absorbed into the country’s economy. Enter bankruptcy – a system designed to deal with insolvency in an efficient manner. Bankruptcy determines how such losses will be “socialized,” i.e. redistributed among all of the parties involved – including, banks, shareholders, creditors, bondholders (which further includes taxpayers if the U.S. government is a bondholder of the company), and current and former employees of the company.

Take for example Freedom Industries. Freedom Industries is the company that caused 7,000 gallons of methylcyclohexane methanol, or MCHM – a chemical used to treat coal during its preparation process – to spill into the Elk River. The spill caused 9 West Virginia counties to declare states of emergency and left over 300,000 West Virginian’s without water for several days. Many people, myself included, have reasoned that the spill was a direct result of a lack of regulations on chemical storage facilities in the state, due to the coal industry’s fierce lobbying against regulatory schemes. In fact, less than a mile away from where the spill occurred, directly across the river, hangs a billboard claiming that President Obama and the EPA are killing jobs through regulations (click into street view and rotate the map and you’ll see it); regulations meant to prevent a disaster like this from occurring and protect citizens from unsavory business practices by companies looking to maximize profits at the expense of a clean water supply. I mean, it shouldn’t surprise you that the facility where the spill occurred was not subject to any regulations or oversight whatsoever in terms of the storing of this caustic chemical, because, socialism you know?

But this is where it gets interesting. Less than a week after the spill occurred, Freedom Industries filed for Chapter 11 bankruptcy, thereby effectively redistributing (“socializing”) their losses. So let me get this straight… Regulations that may have prevented the spill are evil socialist policies that cannot ever be enacted, but redistributing the losses of your failing company is perfectly fine. I think I get it now. On second thought, nope, not really seeing how that makes any logical sense. Freedom! Freedom against redistribution – unless we are redistributing our losses. Freedom against regulation (except regulations we wrote), unless of course we are about to get sued for failing to maintain our chemical storage facility – even though we weren’t required by law to do so, but of course would have done so anyway because, well, because the free market dictates we should (right) – in which case, sure why not hide behind a regulation that could protect us against court judgments. Oh yea, did I mention that? By filing for bankruptcy, Freedom Industries could potentially protect itself from court judgements against it. Like, say, a money judgment in favor of someone who got sick due to the chemical spill.

As the father of capitalism, Adam Smith, once said:

“The interest of [businessmen] is always in some respects different from, and even opposite to, that of the public … The proposal of any new law or regulation of commerce which comes from this order [from the businessmen] … ought never to be adopted, till after having been long and carefully examined … with the most suspicious attention. It comes from an order of men … who have generally an interest to deceive and even oppress the public.”

Or, in this case, the proposal by businessmen to not be subject to any laws or regulations at all, “ought never to be adopted, till after having been long and carefully examined,” for it comes from an order of men who generally have an interest to put the public water supply at risk and then redistribute their losses to the rest of us while claiming to hate socialism.

 

DISCLAIMER:

The information in this article is provided for general informational purposes only and is not intended to be legal advice. The law changes frequently and varies from jurisdiction to jurisdiction. Being general in nature, the information and materials provided may not apply to any specific factual and/or legal set of circumstances. No attorney-client relationship is formed nor should any such relationship be implied.

Image via John Sherffius

Ilyssa Fuchs

Ilyssa Fuchs is an attorney, freelance writer, and activist from New York City, who holds both a juris doctor and a political science degree. She is the founder of the popular Facebook page Politically Preposterous and a blog of the same name. Follow Ilyssa on Twitter @IlyssaFuchs, and be sure to check out her archives on Forward Progressives as well!

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  • Stephen Barlow

    THIS should be the Democrats response to all things Republican.

    “Republican socialism is when you, the working taxpayer, are forced to subsidize Republican business losses and suffer damages because of private lobbying. Democratic socialism is when you, the working taxpayer, are protected by government regulation from being poisoned, harmed or endangered by greed, negligence or malice.”

    Lobbying should NOT be a tax deduction for business. Neither should political contributions. Nor any and all damages from business operations. Nor any and all court costs, fines, penalties or restitution for damages caused by a business.

    And if negligence were to be found that harms the public @ large, all awards an expenses fro restitution should be treble and invested in a public trust to be used for emergency clean up, care and containment. SUPERFUND on steroids.

    Any obstruction of justice, cover up or fraud would have mandatory jail for any and all board members, managers, partners, and majority stockholders. (In other words, if a Koch Bro spills oils and lies about it, he goes to jail for those lies.)

  • Steve

    I would not recommend labeling the chemical in question as “caustic” as that is a chemical term reserved for oxidizing agents such as hydroxides.

  • strayaway

    GM and Chrysler were in bankruptcy. In the end, taxpayers swallowed $10B with GM and Chrysler was subsidized by taxpayers to become an Italian owned company. I hadn’t realized that conservatives saved those companies. I thought that President Obama had claimed the credit for “saving Detroit”. It’s ironic that after Obama saved Detroit, it too is in bankruptcy after generations of Democratic control. Going back, Chrysler needed Nixon’s help too so an argument could be made that bailing out US auto companies is a bi-partisan effort.

    In the 1960’s it was decided that an easy way to strengthen our allies in S. Korea and Japan was to make it cheaper to import their cars. That, and liberals’ penchant for buying foreign cars instead of supporting US labor, had a huge effect on the downfall of the US auto industry and resulting bankruptcies.

    • Mrs_oatmeal

      Many of my Republican friends had foreign made cars. I had a Ford. Let’s not generalize. Deregulation started in the 80’s and has cost us dearly since. Trickle on down…

      • strayaway

        By percentage of purchasers in 2012-

        The most Democratic models:

        1. Honda Civic Hybrid
        2. Volvo C30
        3. Nissan Leaf
        4. Acura TSX Wagon
        5. Ford Fiesta Sedan

        The most Republican models:

        1. Ford Mustang Convertible
        2. Audi A8
        3. Mercedes GL
        4. Ford Expedition
        5. Ford F-150

        from a 2008 survey- “It may not surprise you that the survey found import cars to be a more popular choice among Democrats than Republicans, with 71% of Dems claiming to drive one. But another piece of data may be a surprise — imports outnumbered domestics even among the Republicans, where about 57% claimed to drive one. In the survey, Republicans endorsed Ford and GM cars by almost a two-to-one margin compared with Democrats, who preferred Hondas and Toyotas. Chrysler (including its Dodgeand Jeep brands) appeared to be common ground, where voters on either side of the aisle were equally likely to own one.” -US News

  • Pipercat

    I wonder if their insurance carrier put up three fingers and said, “read between the lines.”

  • Matthew Reece

    Let us not confuse the Austrian School view with that of typical Republican policymakers. John McCain couldn’t wait to suspend his presidential campaign in 2008 to go bailout the banks. Most of us who believe in the Austrian business cycle theory would have allowed natural selection to eliminate the stupid from the ranks of bankers, CEOs, and speculators in 2008. No bailouts would have occurred, the market would have cleared, the currency would not have been debased by quantitative easing, and we would have a real recovery for everyone, not just for the 1%.

  • charleo1

    Isn’t there a lot about about the new version of Conservative, that should strike everyone as being extremely preferential to the largest corporations, and the richest people in the world? A stupid question, many might say. But, if that’s so, why shouldn’t Republicans be proud of that? I mean, why beat around the bush, as they say? Or worry, some might conclude they are not being represented? Why not, just come right out and say, we are certain if we always support these policies that help big business, and big bank accounts, we’re sure that’s going to work out better for all concerned one of these days? Or, did Ronald Reagan already say that? Well,, maybe I’m being unfair? However, they absolutely refuse to put together a list, where we could all see exactly, all in one place, what it is they are insisting all of us, rich, and poor alike, should support. Or, how, when each item of their wish list is enacted, and it’s all working together, as intended, how that would work, and what that would look like. In fact there are policies like using the wealth, and power of the Federal Government’s implicit financial support. To bolster investor confidence for otherwise shaky, complicated, and poorly understood instruments, like collateralized debt obligations, or credit default swaps. That would seem to provide an unfair advantage to the largest, too big to fail, banks, and insurance companies. And, be in direct conflict with the oft stated policy of strict adherence to a free market economy. Or, maybe there are explanations that settle the apparent incongruity this article, and several others have pointed out. Perhaps, since it is the Left, and their constant concerns about the poor, and the working poor, that are often held up to be the culprits. They would explain how it is they fit into all of this. And how much better off, and more blessed with freedom we would be, if Conservatives ruled the land. What that new found freedom would look like. Just lay it all out there please, for people like me.