Jean Angelica D.
Cabigao
BUS 185 – T (6:10 – 9:00 pm)
Chapter 3 – The GM Bailout
Questions:
1. In your view, should the GM Bailout have been done? Explain why or why not using the ideas
of the various thinkers discussed in this chapter. In your view, was the bailout ethical in terms
of utilitarianism, justice, rights, and caring?
In my point of view, the GM bailout should have been done, it is because the costs to society could
be higher without the bailout than with it. And without the bailout GM would not have been able to
borrow money from the banks and it would go bankrupt. GM employs more than 200,000 workers and
finances more than 400,000 retirees. So, its bankruptcy would directly harm millions of people and
affect the stock market and economy. Moreover, GM has been a largely profitable company for many
years. If the company can restructure, then the government may start earning a profit in the future.
The ideas implied are that moving the free market-based economy is a dangerous step towards
socialism. Socialism is characterized by government ownership/control of capital or a forced pooling
and redistribution of wealth. Using Locke’s view to analyze the GM Bailout case, it is obvious that the
government should not have helped GM or other companies by injecting money to the firm. It will
contradict Locke’s idea of no government intervention in the market. Also, the bailout done by the
government was not protecting GM’s right to have equal right to life, liberty, and property, but it
violates other entities’ right in the market. Another argument would be by Adam Smith, who said that
free markets and private properties will provide more benefits than the government intrusion, seen
from the perspective of utilitarianism. Market competition will encourage people of their self-interest
in markets that will maximize the public’s welfare. However, government’s opposition will reduce the
public’s welfare as there will be shortages and surpluses. Regarding the case, it seems like the
government’s decision to save the company was not right because its involvement will lower the
public’s welfare as it will affect people’s decision on how to pursuit their self-interest and would not
produce an increasing result regarding the public’s welfare. Free markets, free trade, and private
properties were criticized by Karl Marx as he believed that they created inequality rather than giving
more benefit to the society. Free market is deemed to have produced inequality such as exploitation of
workers. Workers were withdrawn from their life activities and the ability to satisfy their human needs.
Marx regarded that government was made to protect the ruling class’s properties in which government
is used to dominate the lower-class people.
In my opinion, the bailout was ethical in terms of the following: utilitarianism because it focused
on maximizing the overall good; the good of others as well as the good of one’s self. Also, because the
costs to society of not rescuing GM are probably higher than the costs of the bailout. While, Justice is
on how the benefits and burdens are distributed among people; this is not ethical from a distributive
justice viewpoint because the managers of GM could enjoy its profits during its profitable years while
the taxpayers must bear the losses. It is also not ethical from a retributive justice view 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. In terms of rights, looking at individual’s 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, so the bailout is unethical. However, the bailout may defend the rights of well-being of the
employee’s as they can maintain their salary which would be ethical. On the other hand, when caring
about the employees or people who are otherwise dependent on GM, the bailout is ethical. However,
caring here may not be ethical because the profits of GM were not redistributed to citizens either.
2. In your judgement, was it good or bad for the government to take ownership of 61 percent of
GM? Explain why or why not in terms of the theories of Lock, Smith, and Marx.
I think it is better for the government to take 61% of GM, which make the government take the
most control over the company. With government intervention, it could avoid free market monopoly
which means the government holds highly as regulator of the market. The government is also helping
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. In terms of the theories of Lock, Smith, and Marx, 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. However, 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. But then, 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.