When Jonathan Swift’s “A Modest Proposal” was first published, its sustained and unyielding irony lead more than a few to believe that the Irish scribe was actually advocating for cannibalism and infanticide. With the benefit of nearly 300 years, we can now recognize Swift’s detailed plan to serve the children of Ireland’s poor to their landlords as biting satire. Reading the LA Times‘ Dan Neil’s own “modest proposal,” one can’t help but go back and check for signs of self-aware irony (a far less scarce resource than it was in 1729). Sadly, there’s no much to go on, leading me to believe that Dan Neil actually wants the United States federal government to purchase General Motors. Or is there? After the usual litany of Big 3 woes, Neil “modestly proposes” as US takeover of GM. He then correctly anticipates the “gall of free-market ideology rising” in his readers, and he breaks down the case. And it’s off to irony no-mans land.
“Here are the benefits of nationalization,” as Neil sees them. First, GM is too big to fix with just $15b, and believe GM can “magically right-size in Chapter 11 is foolhardy.” In other words, it’s gonna cost a lot and it can’t be easily “right-sized.” Using these facts as arguments for nationalization gets my irony alarm ringing like it’s a Monday, but Neil keeps pushing. “Time is of the essence. Congress, writing a GM law and using federal power to abrogate contracts, could achieve at least some of these goals at a stroke.” Ah, so let’s open a huge can of federalism worms then, shall we. After all, the federal government can do whatever it wants, right?
After a brief recounting of GM’s alleged strong points (overseas ops, Volt, ‘vette), Neil then makes the bold claim that GM is competing with “quasi-nationalized” firms. Meaning? “If you consider the advantages the government of Japan has bestowed on Toyota, Nissan and Honda — in terms of healthcare and retirement benefits for its employees — the unevenness of the field is clear. The same goes for most European companies, and the rising rivals in China will enjoy similar state-subsidized advantages.” And though Neil is approaching a solid argument here, he fails to consider what it would be like for (say) Ford to compete with “GM-USA” as Neil terms his proposal. Word to Neil: if this is satire, go the whole nine yards and back the American Leyland line. It’s what Swift would have done.
The hardest part of analyzing Jonathan Swift’s satire is discovering exactly who and what he’s making fun of. Neil, on the other hand, is clearly motivated by green. Energy independence, that is. “Let’s avoid the euphemisms and have the courage of our supercharged Keynesian convictions,” writes Neil, once again stimulating the flow of “free maket ideology gall.” “By nationalizing GM, we can aim the company’s astonishing resources at one of the biggest public-policy problems we have: oil. Restructured and refocused, GM could build green vehicles by the millions in a few years and still have the capacity to build gasoline- and diesel-powered pickups (which we’ll still need) … and maybe even some Corvettes on the side.” Or, we could look into extracting alternative fuel from babies. Just sayin’
With all those liposuction clinics in LA, he missed the obvious solution to green energy: LipoPumps. Drill the obese! Not that way, btw.
Last time I looked, German companies have to pay half of their employees social security and health care costs as well as for company retirement benefits.
Well we’ve been talking about American Leyland around here for a long time……..
This health benefit stuff is bogus.
The problem is GM offered awesome plans that it can no longer afford. Unless the plan is to refuse to let workers bargain for better benefits, a universal health care system wouldn’t have stopped it.
As far as money goes, those companies are paying for their workers health care, the only difference being whether the check goes to the government or to the insurance company.
The license plate in the caption is awesome.
“Insanity: doing the same thing over and over again and expecting different results.” Albert Einstein
http://en.wikipedia.org/wiki/British_Leyland
Simple soulution retirees are switched to Medicare which is our free national health care. If thre retirees want more they simply pay 200 dollars amonth for a supllemental private insurance like my 91 year old dad did before he passed away in 2006.
Re: ““If you consider the advantages the government of Japan has bestowed on Toyota, Nissan and Honda — in terms of healthcare and retirement benefits for its employees — the unevenness of the field is clear.”
This is a bogus argument that he could just as easily applied to Canada. I refer to it as the “free lunch” argument – as in the government comes in a pays for free medical care. FREE, FREE, FREE. Isn’t that wonderful.
Too bad we all know there is no such thing as a free lunch or free medical benefits. The simple fact is the workers in Canada (and Japan, et al) pay for their medical benefits through higher taxes where in the U.S. the company (i.e. shareholders) pay the cost. Assuming Canadian and U.S. autoworkers get similar gross pay, I expect the after tax take home of the Canadian auto worker is less.
Proposition 1: I like some GM products (especially the Ford F-150!)
Proposition 2: GM is “very” big
Ergo: GM must not be allowed to fail.
Huh?
This is a bogus argument that he could just as easily applied to Canada. I refer to it as the “free lunch” argument – as in the government comes in a pays for free medical care. FREE, FREE, FREE. Isn’t that wonderful.
The best part of all this is how, just a few years back, big business was asking–nay, begging–governments to cut social programs because it would result in lower taxes, which always makes things better. If you lower taxes, you get puppies and kittens and rainbows, and everyone holds hands and sings kumbaya all day long.
And now, tax-provided healthcare is a competitive advantage? Really?
What it comes to, really, is this: rich people don’t want to pay taxes, or pay for employee benefits, or suffer any kind of restriction on their ability to earn more money. Expect the return of indentured servitude (or full-on serfdom) in the next century.
in essence, Mr Neil is on to something. after implementing RTG, the resulting significant ROI would justify the investment. there is a plan that will work. hello???
psarhjinian said:
“If you lower taxes, you get puppies and kittens and rainbows, and everyone holds hands and sings kumbaya all day long.”
Laughed out loud. Sure would be nice if life were that simple, wouldn’t it?
Harper thinks things are that simple.
Dan Neil is missing a marketing plan, and it’s not Buickman’s “selling” plan, called Return to Greatness. One has to separate the tactical (selling) from the strategic (marketing), something M’sieu LaNeve at GM has not quite figured out in all his years of work. He has one title, does nothing at all to justify it (Marketing) and spends his time sending out selling plans to his poor, be-nighted dealers, who each have 10 times the experience at flogging cars and trucks than LaNeve will ever have.
Making GM into a Federal Company in a country not used to nationalized for-service companies (except the USPS)would be an utter waste of time.
No more to be said.
I can’t say it better than the first comment on the LA times site:
“Based on the governments ability to build mechanical things, like space craft and weapons cost-effectively, what makes you think that the world is ready for a $200,000 Oldsmobile? I can’t see how this could possibly be a successful strategy.”
Our free market system works, in theory, by letting the market winnow out the unsuccessful and kill them off. Only the strong survive. As time goes on, the efforts of the strong, not weighed down by the weak, give us more and cheaper goods and services.
When the government intervenes in the market, it is usually to protect the weak. The system then cannot work. The weak struggle on, using precious resources that cannot feed the strong. We all lose.
It’s like a well-meaning child who helps a chick by cracking open its egg and letting it out into the world. The chick needs to crack the egg itself, making its own efforts and on its own time. Playing mother hen, when even a hen will not intervene, goes against nature and results in harm not good.
The government cannot help here. Let GM and the others struggle through however they can. If they die, that is life. If they live, so much the better.
I for one think that no company like GM with revenues over $100 billion a year is going to disappear without a trace. Let’s let the market system work – without the government stepping in – and see what emerges.
mmm . . . baby fuel.
And though Neil is approaching a solid argument here, he fails to consider what it would be like for (say) Ford to compete with “GM-USA” as Neil terms his proposal.
“Let’s avoid the euphemisms and have the courage of our supercharged Keynesian convictions,” writes Neil, once again stimulating the flow of “free maket ideology gall.” “By nationalizing GM, we can aim the company’s astonishing resources at one of the biggest public-policy problems we have: oil. Restructured and refocused, GM could build green vehicles by the millions in a few years and still have the capacity to build gasoline- and diesel-powered pickups (which we’ll still need) … and maybe even some Corvettes on the side.”
I think you answered your own question in the next paragraph. Ford will be able to compete quite nicely with a mismanaged, politically motivated car maker like Dan Neil is proposing. Just because you make fuel efficient cars of the future doesn’t mean people will want to buy them; something that Mr. Neil doesn’t seem to account for in his analysis.
@Lumburgh21: One other thing to consider is that the government doesn’t like competitors, and having the coercive power of the state it can write the rules any way it wants to. They could subsidize purchases of their own cars by offering tax incentives for buying them, or even more directly by using tax money to pay for some or all of the production costs (lowering the cost and thus the purchase price artificially). They could make it a requirement that all new models designed by non-government automakers must be approved by a “sanctioning body” (made up of government bureaucrats, of course) before they can be produced – American Leyland models would always be rubber-stamped, of course. Since GM is really only good at making trucks, they could make it illegal for anyone else to make trucks for sale in the US. Some may say I’m being ridiculous, but what people forget about government-run enterprises is that they are owned and operated by the same entity that makes the rules by which everyone plays the game, and can thus rewrite those rules at any time. Indonesia did something like this at one time – taxes on vehicles not manufactured by the Indonesian state effectively doubled the price. This was the only way they could get the public to buy their crappy cars.
There are many companies that have, or could develop, the capacity to deliver mail in the United States (UPS, Fed Ex, etc), but yet no one has. Why? Because the government has declared itself as the only entity allowed to deliver mail. It doesn’t matter to the end user – as long as they get their mail in a reliable and timely fashion, who cares who delivers it? It matters a great deal to the many thousands of government employees who have a stake in how the mail is delivered now. In a free market system, the players have to compete against each other. When the government is also a player, they don’t need to compete with anyone.
All this is a long way of saying that just because the government would suck at making cars doesn’t mean that other car makers will be better off for it.