We the people now own about 60 percent of General Motors. Thank God. I know the old joke about being from the government and here to help; I’m familiar the anti-socialist swell that’s been rising since Obama’s inauguration. I am also convinced that right now federal control of what was once the world’s largest car marker could be the greatest thing to happen to the company since Alfred P. Sloan.
Putting aside the obvious—that the General would not have survived the battles of the last 12 months without Uncle Sam’s support. A controlling interest of GM in the fed’s hands isn’t all that bad for one simple reason: the government isn’t all bad. The bad gets more press. There are lots of success stories out of Washington that for lack of drama, or surfeit of politics, don’t immediately enter the fray when the free-market arguments start.
Defeating the Nazis or putting a man on the moon are the easy ones and not all that appropriate for comparison. The outcomes matter, though. Government can work. Just look at the Federal Communication Commission.
Created by Congress in 1934, the FCC was tasked with regulating America’s airwaves. To do so, they worked with wildly competitive private companies competing in invasive technologies that would shape the progress of the whole world. That’s not terribly different that automotive industry.
The FCC did it right, allowing industry to flourish, without choking itself to death. Radio and television grew thanks to standards, not despite them. David Sarnoff, an early president of RCA said at the time, “Competition brings out the best in products and the worst in men.” The FCC did, and kind of continues, to mitigate the worst aspects of capitalism, while allowing the best to develop.
Similar arguments can be made for the Food and Drug Administration, the National Aeronautics and Space Administration and (ahem) the Federal Reserve.
In each case Washington plays a role and the outcomes have been laudable. Ignoring an industry does not necessarily guarantee innovation. Sometimes the prescription is care and nurture . . . and that maybe the key to reviving General Motors, if not the whole auto industry.
When the government acts as an incubator, providing shelter from some—not all—market place stessors, the results can be strong. The National Institutes of Health, for example, provide funding and resources for research that is too new for the market or perceived as weak in profit potential. Genuine, important advancements in medicine, or any pursuit, frequently come from the long shots, as opposed to the safe bets. To date, the NIH has supported hundreds of raw ideas that turned into commercial ventures.
The Internet may be the best, most current example. Its core was conceived at the US government’s Advanced Research Projects Agency and based on a system pioneered by the US Air Force. Although it thrives in the force of the market, it took root well sheltered from those same forces. The original ARPANET that linked disparate labs had no business model. There would be no way to monetize the creation for next twenty years. That time gave the technology the opportunity to mature, bulk up and get ready for the world.
The exact mechanisms used by the Department of Defense or the NIH don’t transfer, but that is part of the point. The feds have, in some cases, actually been flexible. The capability is inherent in our system of government, even if it’s often ignored. In this case, there can be no cookie-cutter approach. We’ve never owned a failed car company before. But we own one now.
The benefit of which: insulation. The number one pressure corporations feel after they go public comes from the heat generated by quarterly reports. The stock market can provide a lot of energy to a company, and then too much. Investors focused strictly on three-month prospects, often do so to the determent of long-term goals. The market—especially in the hyper-capitalist USA—tends to make management near sighted. In an industry with relatively long development times, like automobile building, the trait can be disastrous.
With the federal government holding a solid majority of stock, General Motors will be more immune to daily market fluctuations. Our car company is no longer a slave to the quarterly report. It can look farther down the road; an attribute frequently sited as part of Honda and Toyota’s success. New GM can plan, hedge, execute and achieve.
And then we sell. I’m no Marxist. I just think big projects can do well with a big caretaker and there’s no one bigger than big brother. You want to establish the First (or Second) Bank of the United States, build a canal in Panama, an interstate highway system or re-establish a manufacturing icon, don’t be afraid of Uncle Sam. He is, after all, us.
I agree with the author, GM will do well. Their factories will be operating at near 100%, something Toyota is no where close to. The govt will sell their stake in GM at some point. The real key to GM long term success, who is going to head GM? Fritz? A fish rots from the head.
How refreshing! No, govt. is not all bad, and has had some successes.
You want to establish the First (or Second) Bank of the United States, build a canal in Panama, an interstate highway system or re-establish a manufacturing icon[? D]on’t be afraid of Uncle Sam. He is, after all, us.
And what happens to competitors? Are we going to destroy other manufacturing icons in the process, or is Uncle Borg ultimately going to absorb them, too? There is already too much capacity out there. If GM is re-animated come hell or high water, then it will be at a competitor’s expense.
This is bad juju.
So, Government can work. Granted a million times over. But that doesn’t mean it’s a good idea. Sometimes Government only works because there aren’t any alternatives, and sometimes it only works because Government makes darned sure there aren’t any alternatives.
Going over his success stories… who privately competes with the FCC? (That wouldn’t be legal.) Where’s the private Panama Canal? What private company put a man on the moon? Nobody, nowhere, and nothing.
So, the question is: will Government Motors drive its competitors out of business thanks to collusion with regulators, or will it simply become illegal to compete with GM?
The FEd? you’ve got to be kidding.
Fritz? although his resume patterns Wagoner, that is a result of GM’s normal career paths for top executives. the man has been successful around the globe. he has given a breath of fresh air with his straight talk for many years. IMO he has the knowledge, experience, and ability to provide the leadership needed by the new GM. although the closure of Pontiac and thousands of dealers are gross errors, we can’t be sure these decisions are’t because of Task Force dictates.
what remains to be seen from Fritz is if he cleans house at VSSM and changes the disastrous marketing responsible for years of market share decline.
I always laugh when someone brings out the Gipper. Subsidize it? That’s all we do. Water and electricity are cheaper in Las Vegas than Minneapolis because we (as in the American taxpayer) subsidize the water and electricity for the residents of Las Vegas. We grow one of the most water intensive crops in the American desert because we subsidize it. We subsidize the American agriculture industry with almost $11 billion dollars in direct welfare, not counting the various trade protections laws we have erected to protect these corporations from actual competition.
Let’s not kid ourselves who receives that almost $11 billion in subsidies. General Mills. ADM. Kellogs. These companies sit squarely among Fortune 100 firms, and exert enough influence to defeat the most recent attempt by the Great Socialist (e.g., Barak Obama) to rid finally our nation of these $11 billion welfare payments.
Ronald Reagan kept smiling and waving about small government while he ran up the largest peace time deficit. The Reagan deficit is only eclipsed by that other champion of small government, George Bush the Junior.
Here’s your first giant clue: when someone preaches about small government, hold onto your wallet because they are going to charge, charge, charge. Guess who will pay the bill with interest?
What does that champion of small government and the Great Socialist have in common? They both bailed out the Detroit 3. Reagan erected trade barriers on cars built outside the US. Toyota, Honda, Nissan, etc. responded by shipping more expensive, better built cars that Americans continued to buy. Detroit 3 responded by raising their prices and building the same terrible car. Reagan’s effort did not staunch GM’s loss of market share.
The analogy of American Leyland serves a usefulness up to point. Like most analogies, it has lost its usefulness because people do not understand the analogy. They lack the necessary knowledge to understand how and when the analogy fits. The BBC carried two seperate interviews with two seperate people who were familiar with the creation of British Leyland. If you understand and know that piece of history, then you understand and know that we are not witnessing the creation of American Leyland.
Indeed, the creation of American Leyland began in 1954 with the creation of American Motors Corp. This policy has continued ever since.
Wait. Stop. A Republican president actively re-ordered an American market to ensure several failing entities would survive as one, stronger, more competitive entity. I am shocked because I thought Republicans believed in free markets.
Oh, wait. It will get better.
The same Republican president (Eisenhower) also erected trade barriers and provided large tax breaks to the US steel makers, who could not compete with the German and Japanese competitors and their newer factories. Those trade barriers and tax breaks delayed but did not prevent the bankruptcies of many American steel companies.
Bush the Junior, that champion of free trade, also erected trade barriers for US steel market. It did not solve the problems faced by the remaining large mill operators.
Returning to Reagan, we had the largest bank bailout as well as our first bailout of the financial industry under Reagan.
Republicans just like their Democrat counterparts LOVE to bailout an industry or three or five.
Here’s your second big clue: when your entire argument rests on repeating something a talking gas bag especially those of the junkie variety, you have no argument only specious, vapid observations.
Finally, let’s consider two other instances when an American president re-ordered industries. Yes, these restructuring occurred under another Republican president.
Drat. I hate it when Republicans behave like Socialists especially the European kind.
Nixon separately created Conrail and Amtrak. Conrail was formed from several bankrupt rail freight operators, and competed against several for-profit rail freight operators including Burlington, Norfolk Southern, etc. Under Reagan, Conrail was returned to private owners, providing a tidy profit to the American taxpayer.
Amtrak was formed when the government took over passenger rail service from private entities that no longer wanted to continue operating passenger rail service, preferring to concentrate on other aspects of their respective industries. Yes, this story sounds eerily like AMC’s story.
Perhaps, Conrail and Amtrak serve as the proper analogies for the current state of the automobile industry. Perhaps, we should consider those histories (Conrail’s, and Amtrak’s) for lessons to learn and apply for this current situation.
It must be terrible for people who want to call our current president the Great Socialist when facts completely counter the statements made by talking gas bags especially those of the junkie variety.
IMO what is missing in all the moaning and groaning about bailouts and such is that the government is the silent partner in everything we do because of the income tax code. If a business fails the government suffers a loss of income. If it bails it out with loans or whatever, some of the bailout money comes back to the government as tax revenue. And do to the multiplier effect, the bailout percentage that comes back to the government can be larger than the tax rate would imply.
So even in a “pure” capitalist system the government is deeply involved in its success or failure just as in socialism. While capitalism and socialism are often presented as the only options, in the real world there is a long continuum between the too. The question is where we should be on the continuum to deal with the current situation.
In the former Soviet Union and in Maoist China as in Cuba today they were far too far to the socialist end. And during the Reagan through the Bush II years Americans moved far too far to the capitalist end of the continuum which has resulted in the current collapse.
We now have to do some semi socialist things like bank and auto bail outs and national health care to get closer to the center which is where America can prosper. I don’t think there is any danger of getting too close to socialism in America. The danger, as has been demonstrated again in the last 30 years, is getting too close to pure capitalism.
Way back it was the DEFENSE Advanced Research Projects Agency, and some of us played around on something called the DARPAnet. The agency’s name was sanitized later, in the name of “peace dividend”.
“Have you guys ever taken a look at the condition of the public road system?”
In many countries they are outstanding, and they used to be in the US as well. Then the US fell into the all government is evil, tax cuts are the solution to every problem intellectual sink hole.
” … the success of Reaganomics … ”
People forget that Reagan sometimes raised taxes and sometimes lowered them depending upon the situation at hand. Reagan, for instance, supported the 5 cent/gallon increase in gas taxes in 1982. Ideologues also forget that the US economy boomed and the budget deficit disappeared under Clinton, thanks in part to tax increases.
GPS technology can be added to the success story list as well. To this day all of the satellites which enable the GPS system are bought and maintained with taxpayer money.
To put it in simple terms,the far right is every bit as loony as the far left.
Here in Canada we have a governing conservitive party,propped up by Quebec seperatists,and the lonny left.While the Liberals sit in oposition.
Politicions of all stripes with basic math skills,have reached a conclusion.Canada social safety net comes with a wicked price tag.
So our little socialist paradise is now the proud owner of a 12% interest in GM.
Al Gore never claimed to invent the internet. (I do not believe in global warming, so I am not a Gore lapdog).
Check Wikipedia or Snopes. Gore realized the potential of the internet, and sold the idea to Congress. Without Gore, the internet never would have been created for many more years, if ever. This is the truth of the situation. I give Gore credit for funding the creation of the internet, I think he is wrong on Global warming.
Republicans take great glee in misquoting Gore, but they are lying.
“Despite the derisive references that continue even today, Al Gore did not claim he “invented” the Internet, nor did he say anything that could reasonably be interpreted that way. The “Al Gore said he ‘invented’ the Internet” put-downs were misleading, out-of-context distortions of something he said during an interview with Wolf Blitzer on CNN’s “Late Edition” program on 9 March 1999.”
Source
The government takes almost half of the peoples income and that is not enough?
Personal Income, 2008: $12.1 trillion
Government receipts, 2008: $4.1 trillion
4.1/12.1 = 34%
34% ≠ “half”
Keep in mind that that $4.1 trillion includes all taxes – corporate, sales, personal income, social security, etc.
Out of 140 countries for which there is data, the United States ranks 112th in terms of tax revenue as a % of GDP. Out of 18 developed economies, our total taxation as a % of GDP is the 2nd lowest, with Japan at the bottom.
bevo :
June 7th, 2009 at 9:34 am
Perhaps, we should consider those histories (Conrail’s, and Amtrak’s) for lessons to learn and apply for this current situation.
And just how long has Amtrak lost money and how many billions sunk into it?
If I were to use a case to support government action Amtrak would be one of the last examples I’d use. Amtrak was created in 1971. It has never turned a profit and still sucks off the teat of the taxpayer.
Do we want to dump billions of dollars a year into an incompetent automaker for 38 years like we have Amtrak?
http://www.boston.com/news/nation/articles/2009/03/14/obama_boosts_amtrak_funding/
Just how high do the taxes need to be to make Government Motors a success?
How much have taxes been raised to pay for General Motors?
Tell me – you seem very protective of your money. Would you share with us the combined cost of the Iraq and Afghanistan wars through the end of this fiscal year, plus the increased cost of defense spending and veterans benefits above the FY2001 baseline, adjusted for inflation?
If you could then compare that number to the cost of the GM bailout, that would be handy.
It has never turned a profit and still sucks off the teat of the taxpayer.
As opposed to commercial aviation?
Except for the fact that runaway inflation thanks to Obama printing money like no tomorrow and taxpayer resentment will doom GM to the oblivion it and the UAW deserves.
You forgot to add in state and city taxes.
No, I did not.
Why do you want to make the USA just like the USSR?
Thanks for playing.
—
Except for the fact that runaway inflation thanks to Obama printing money like no tomorrow and taxpayer resentment will doom GM to the oblivion it and the UAW deserves.
We just experienced the first annual deflation in 54 years. M1 was lower in April than in December.
handplane:
You have your DARPA/ARPA history incomplete. According to Wikipedia, ARPA was renamed DARPA in 1972, then renamed back to ARPA in 1993, only to become DARPA again in 1996. Also according to wiki there were base closures in 1993 and again in 1995. Methinks it’s possible the “D” was dropped to improve the agency’s chance of survival of the BRAC committees.
At the risk of interrupting this socialist love fest, there are three obvious facts the goofy left tends to ignore.
1. There are too many automobile factories on planet earth.
2. There are too many automobile companies on planet earth.
3. Some of them will have to leave the market.
4. Obama’s faux bankruptcy process violated Federal Bankruptcy laws and precedents in the distribution of assets.
No amount of good intention, political bias, or compassion is going to change this situation. If government intervention is good for U.S. companies, then it is also good for German, British, French, and other foreign companies. Unfortunately (…or fortunately), 1, 2, and 3 above still apply.
What we are witnessing is the beginning of a decade(s) long bankruptcy process that allows for a political dissolution of assets and liabilities. In the long run, older, inefficient companies are being replaced by more efficient competitors from the east, (…not that I look forward to driving Chinese or Korean cars).
There is no possibility Obama Motors will counter 1, 2, and 3 above. As stated elsewhere on this website, a majority of US respondents do not favor this level of government intervention in the auto industry. Negative attitudes will influence purchase decisions. It will not take many brand switchers to eventually doom the new political companies. Ford is already taking cautious steps to position themselves against the political foolishness while at the same time taking advantage of it.
Obama’s actions are politics, not economics. Even number 4 above could be in jeopardy as of this morning.
The FCC did it right, allowing industry to flourish, without choking itself to death.
Actually, the FCC, from the 1940s to the late 1960s, seriously retarded the development of a number of telecommunications technologies because it viewed its primary mission as defending the dominance of the major radio networks and the AT&T/Bell monopoly.
The FCC did, and kind of continues, to mitigate the worst aspects of capitalism, while allowing the best to develop.
Similar arguments can be made for the Food and Drug Administration, the National Aeronautics and Space Administration and (ahem) the Federal Reserve.
I’m familiar with the medical parts field. A strong argument could be made that the FDA actually kills people by delaying drugs & devices to prove effectiveness beyond safety.
Also, the above agencies don’t have to actually compete with a Toyota, Honda, Ford or Nissan.
NASA is technically good – but horribly costly. They’ve also got the FAA enforcing rules & regs that make private space flight prohibitively expensive.
@ bluecon:
The Chicago Fed recently released a paper that had as its conclusion: ‘the public road system in this country is just fine’
haha!
Why didn’t you answer the question?
Yeah, why didn’t you?!?!
And once you’ve answered that, I demand an answer to these questions, too:
Why do you hate apple pie, baseball and your mother?!?!
Why do you abuse kittens and puppies?!?!
Why do you hate my freedom?!?!
Are you or have you ever been a member of the Communist Party?!?!
I want answers! I mean it, man, I mean it.
Yes I despise any sort of socialism. That is why I want Obama stopped.
Um, you’re Canadian . . .
I love apple pie, baseball, mothers, kittens, puppies and freedom
You keep on fighting the good fight. No one is challenging your love of country.
No, no, we’re all gunning for Long126mike, who has been identified as an TARP-Bearing Enemy of Freedom (TM) and who is strongly suspected as being an agent of Soviet influence. (Just ask my neighbor, she knows.) He must be a threat to the country — after all, he disagrees with you, so he has gotta be.
I also have it on good authority that he uses his new Chevy Malibu to kill golden retrievers on his way to the Party meetings. He has blood on his hands **and** the front grille of the car. (I’ve seen pics, and he even has those that New GM “USSR #1″/ Heartbeat of Moscow license plate on the front of it. Shameless, shameless.)
I’m just glad that you’re on the case, and keeping him honest. If you can get the fur off of the bodywork, that would just be excellent.
We just experienced the first annual deflation in 54 years. M1 was lower in April than in December.
December–April is “annual”?
December–April is “annual”?
These are two separate statements. (1) We’ve had a deflationary period and (2) M1 declined between January and April.
The first statement is accurate, just compare April 2009 with April 2008. ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt
The second statement is accurate, although somewhat misleading, given that that M1 is uptrending on the whole (as it should be, given the circumstances.) http://www.federalreserve.gov/releases/h6/hist/h6hist1.txt
What should be enlightening is if you combine these two charts. As they show, it is quite possible to increase money supply without creating inflation.
People who believe that the act of printing money is necessarily inflationary are just wrong and ignorant of what “money” actually is, or where inflation comes from. Printing excessive amounts of money into perpetuity can be inflationary, but it is possible to print reasonable amounts of money over short periods without any inflation being created. Managing money supply means just that — sometimes you increase it, other times you decrease it.
long126mike,
how about looking at year over year #s and some other stats:
M2 jumped $30.8bn to $8.358 TN (week of 5/25) and has expanded at a 4.9% rate y-t-d and 9.1% over the past year.
Fed Credit has expanded $1.188 TN over the past 52 weeks, +135%.
Why do you think I hate socialism.
Honestly, I have no clue. It depends on your definition of it—there are many different types of socialism. What do you hate about Canada’s socialist aspects?
Peter Schiff is looking better all the time.
True. The amount of the fortune that he has lost for his clients has declined somewhat.
We are going to get some sort of big time inflation.
But here’s the funny thing — if your “Austrian” heroes were at all accurate, the massive inflation should have already happened. M1 money supply increased 15.9% over the last year, yet we had -0.7% inflation (yep, that is a negative number) over the same period. Those facts just don’t mesh with your story.
I know that Fed data is just super boring compared to that YouTube infotainment dreck that passes for economics lessons. (Hell, they must be broke, they can’t even provide it in color.)
But there does come a point where you’ve got to look in the mirror and ask yourself how you can ignore every bit of factual data that contradicts your worldview. Because there is a lot of this factual data that you are choosing to ignore, and it pretty much says the exact opposite of what the YouTube paranoid cultists are suggesting.
All the examples of “successful government” show the government being the regulator only. In none of the successful examples the government ran one of the competing companies. They provide FCC, FDA, FAA rules etc. but don’t own and run airlines, TV stations or farms etc.
her is is different, the government comes in after a car industry already exists and screws it all up by giving the worst/weakest competitors an advantage over the healthy competitors. this article didn’t convince me GM would succeed. Even if GM succeeds, how does it help the nation when all the healthy competitors get screwed and may disappear?
If GM and Chrysler were the only companies on the planet to build cars, then the nation would have an interest in keeping them alive. But (fortunately)we ahve other choices (which will get crippled by Obama)
“Why do you want to make the USA just like the USSR?”
I don’t, and never said I did. That is the sort of hyperbolic commentary which shuts down rational discussion. Comparing anything you don’t like to Hitler and/or the USSR may be great for getting the blood boiling, but is not useful in the real world of pragmatic problem solving.
I still have a question for the government haters: How did the allies win WWII when they did so by having their governments completely take over nearly every aspect of industry and finance? Government = bad doesn’t square with winning WWII.
I’m not a fan of communism, but I’m also no fan of modern so called conservative economics. Simplistic ideas taken to their logical extremes often result in unpleasant outcomes.
I will take the relatively high tax rates, balanced budget and reduced war spending of the Clinton years over the reduced tax rates, out of control borrowing and endless war costs of the Bush years any day thank you. Most conservatives applaud the tax cutting, war mongering aspects of the recent Bush years and complain only about his deficits. Guess what, it was the war mongering and tax cutting which yielded those deficits.
@bluecon: I was raised by a bunch of socialist politicians.
You’re sooo lucky. I was raised by a clan of itinerant opossums. (opossii?)
I was going to point out what kaleun stated.
The FCC and FDA are just regulatory agencies and do not run the businesses they regulate. Other than GM and the government printing office I cannot think of a business that the US government runs. Even in WWII the government only contracted with with businesses to produce war materials they did not have an equity position in those businesses.
The best outcome I can hope for with GM as a government owned auto company is that government agencies will be strongly encouraged to purchase GM products for their fleets and that GM will survive by supplying these captive clients.
A worse outcome would be the US government obstructing the competition (Toyota, Honda, Hyundai, Ford) by supplying financial infusions to GM or by imposing narrowly defined regulations on automotive production in order to give GM a leg up.
Even in WWII the government only contracted with with businesses to produce war materials they did not have an equity position in those businesses.
You are confusing equity with management. One can be a manager without having equity, and one can have equity without managing. It happens all the time.
The US government is acting much like an institutional shareholder: an ownership stake with input on the board and CEO, but otherwise not managing the business. The Board is not management, so much as it is a check-and-balance against the CEO.
The US will surely want to do with GM what it just did with Chrysler — find a new operator to run the business. If things play out, expect Nissan to take that role. It’s a fair bet that they’re negotiating that as we speak, but the deal isn’t yet seasoned enough to close.
Amtrak is peanuts compared to what the federal, state, and local governments sink into commercial aviation (an industry that is “private” in name only). It’s also much more pleasant way to travel than flying (and, depending on the situation and part of the country, driving) for trips greater than 150 miles but less than 400. People who bash it have never been on it, or taken one of the worse routes in the deep south and interior west.
PCH–I’m thinking the same thing about Nissan. Which is ironic, because I think of Renault as the model for a GM turnaround!
Amtrak is peanuts compared to what the federal, state, and local governments sink into commercial aviation.
The Amtrak comments made by others here are just a red herring.
Transportation is not a money maker. Our roads don’t make a profit, and are effectively a subsidy to the trucking industry, which doesn’t come close to covering the costs generated by their heavy vehicles. Our airports are money losers that are fed by taxpayers to the benefit of the airline industry. Privately operated public transport was municipalized throughout much of the world because their original operators couldn’t generate profits and went out of business. The whole thing is one big subsidy, which is exactly how it should be.
Expecting to make a profit from any sort of transit makes about as much sense as expecting the fire department or army to be moneymakers. Transportation is good for our overall standards of living, but the ability for it to turn a profit unto itself is rare.
I think Rolls-Royce is a good example of what the US government hopes to accomplish with GM. The UK rightly viewed them as too important to fail and nationalized them in the early 70’s.
Of course, they got spun off the motors division ASAP to Vickers.
If a similar kind of company went tits up in the states, someone like General Electric, I would expect the government to step in. General Motors is a pretty tough sell though.
As far as government runs companies go, Crown owned corporations are fairly common in Canada. The more successful ones tend to focus on services rather than product though. In remote areas where private companies have no reason to set up shop it is necessary for the government to step in.
It tends to be more a more efficient use of taxpayer money if they don’t bother contracting out to a private company and just run the railroad out to the middle of nowhere themselves.
But a car company? I’m not seeing it. It would make more sense to nationalize the parts suppliers in order to protect Ford once GM was dissolved.
David Sarnoff, an early president of RCA said at the time, “Competition brings out the best in products and the worst in men.” The FCC did, and kind of continues, to mitigate the worst aspects of capitalism, while allowing the best to develop.
David Sarnoff used his political connections to suppress Major Armstrong’s invention of FM radio. He didn’t want to compete with a superior product.
People make the mistake of thinking that businesses are free marketeers. Businesses want to make money. Established larger businesses tend to like regulations because they keep barriers to competition high.
Your citation of Sarnoff is highly ironic.
John Horner :
That is the sort of hyperbolic commentary which shuts down rational discussion…
Most conservatives applaud the tax cutting, war mongering aspects of the recent Bush years
Yes, “war mongering” is rational discussion, not hyperbolic commentary.
Interesting and brave editorial, Michael.
The French gov turned Renault around by owning shares, getting involved, and then selling the shares.
A German state owns 20% + a golden share of VW.
Kuwait owns shares in Daimler.
These are only some examples I can quote off the top of my mind, but I’m sure to find more if anybody really needs them.
Yes, “war mongering” is rational discussion, not hyperbolic commentary.
Here, I’ll help clarify.
Bush/Cheney’s expansion of the military during its 8 years directly increased the public debt on the order of $2.7 trillion. Is that sufficiently rational for you?
I’m sorry, but the “Gov’t did ____, and that worked out well, so it should be able to do ____ as well” argument just doesn’t fly. The areas that people like to cite, such as fighting WWII, building the Panama Canal, and the moonshot, are all endeavors that private business and the free market could not do on their own initiative. You can’t simply point to a few examples of successful gov’t actions in the past and draw a logical conclusion that future actions will be just as successful … that’s way too simplistic.
Making cars is something that private business has done to varying degrees of success for over 100 years. The model for how to do it right is there – just let the market decide who does, or does not, do it best. I see no rational explanation why any gov’t, let alone one the idealogical bent of the Obama administration, expects that they can do a better, or even moderately adequate, job than the private sector. One policitians start using these companies as their own political patronage machine (e.g. the New Chrysler, which was advised by the PTFOA as to which the firm they should use for the executive “search” … nothing fishy there, eh?), the game is over. Goodbye Chrysler and GM, you won’t be missed.
“Yes, “war mongering” is rational discussion, not hyperbolic commentary.”
Fair enough. I should have said: Engaging in a war of choice built on false premises.
While reading all this, I decided to register. I have been lurking here for about a year, and spend about a half hour catching up on this site every day. We have missed the point of this whole bailout discussion in this editorial and the arguments surrounding it. The point is not whether it will work or not, (personally I do not believe it will) the US Constitution is a contract between the government and the people. It lays out, for the most part, what the government can NOT do as well as its duties to the people. It also defines the duties of the three branches of government. I invite you to read this fine document with fresh eyes; it is easily found in many places on the web. This bailout, or actions of its like, are not provided for.(See the 10th amendment)I am not Obama bashing, this is a statement of fact. Obama, both the Bushes, the Clintons, and Reagan did things that were all outside the bounds of a document that they all swore to defend. This has become a way of life for our government. Either we must abandon the document that is the foundation of our Republic, or we must make fundamental changes in the way things are run. Under current circumstances, every president is a liar before he/she leaves the podium at the inauguration. I think this is a problem.
Thanks for your time.
It is funny. We berate the government for being so incompetent that they can’t even figure out how to deliver the mail. Yet we trust them with nuclear weapons.
I am very afraid that GM will become like Amtrak. The worst of Gov’t and private enterprise combined.
My uncle was brought into Amtrak back in the 70’s to straighten them out. He gave up. He told me it was the worse cases of nepotism and incompetence he had ever seen. Yet his hands were tied. Too many rules he was not allowed to break. There were unions, political interference, corruption, theft, and frankly too many people inside Amtrak that didn’t want the good times to end.
He told me that within months he knew that the only solution was to shut it down and start over again. Fire everyone. But he was not allowed to do that. The problems were systemic and no amount of management was going to be able to change that fact.
Now here were are 30 years later. Amtrak is still a joke. They are notorious for never being on time, for crap service, and high prices. They still don’t have any competition and are still subsidized.
So please… if Amtrak is the best we can do, then we are screwed.
As someone who works in IT teaching, I think it only fair that Al Gore gets the credit for the fundamental underpinnings of all computing. Sure, he did not invent the InterNet, but he did invent the Al Gore Rythm!
Ka-Bing! Don’t worry folks — I will be here not only all next week, but next month and next year….
Dieseldude – Quite right. Remember the part about only Congress having the right to declare war? That went out the window with Harry Truman – and, of course, Congress is quite happy about that. Gives them the ability to “authorize the war” and then come back and say that “that is not the war that I authorized”.
That’s right Jimmy. Any branch that delegates its duty is shirking it while it shifts accountability. The buck stops…..where?
… I see no rational explanation why any gov’t, let alone one the idealogical bent of the Obama administration, expects that they can do a better, or even moderately adequate, job than the private sector. …
It’s all but impossible to imagine that the govt could do worse. The holy private sector has run GM into the ground – that fact alone is a good reason to believe the govt can do a better job. How could they do worse? How could a bunch of bureaucrats be more incompetent than GM/Chrysler management of the past 25 years? How could anyone? How could people randomly selected from the phone book be any worse?
John Horner
The government did not win WW2.
To say such is silly.
People did.
Heroes, living and dead, did.
In fact, for once understand that the government actually started the horrible war.
http://library.thinkquest.org/CR0215466/treaty_of_versailles.htm
It wasn’t Hitler, but Hitler moving into an environment and seizing it.
Yes, a world which was created by the Gang Of Four, lead by Wilson and that dumb ass Frenchman, Georges Clemenceau!
Government cheerleaders, get real.
I am from Illinois!
Who are you crappin!?
Nobody is saying all government is all bad at all times, and to infer this is again silly and misleading.
But Government, all government, has one built in flaw that eventually devours its heart.
It has the inherit flaws of greed and self perpetuation.
I am trying to think of a well run section of government.
All those above who praise blindly the government, here is your chance.
Help the rest of us naysayers out.
Inform and enlighten us.
Show us where government is well run and efficient.
Don’t give us the blather about the “social” responsibilities it has toward the “civil servant”.
It needs to fill the employment void left by private industry.
In fact, the government worker is outpacing the private sector in pay and benefit growth.
That is NOT efficiency!
Please, show us the government run programs ( those NOT recently started) you so adamantly praise.
Sorry about the typo above…
I meant to say:
THAT it needs to fill the employment void left by private industry.
Sorry…
Also, here is efficiency for you:
http://www.usatoday.com/money/workplace/2009-04-09-compensation_N.htm
The Government is also responsible for Iraq and Afghanistan to a big degree, were close to a million innocents have been killed. They have not been able to do much about millions of starving children worldwide. Its not even so much about Government, Government is society, Society is pretty messed up. Cars are an interesting distractive instrument for many.
So, the point of the article is that scope of turning GM around is so large that only the government can do it?? If that’s the case, it certainly doesn’t marry up with the expedited ‘special’ bankruptcy of Chrysler, parts of which were sold and parts that weren’t. Sounds like a Ch 7, not 11.
Nor does it marry up with the cash injections both GM and Chrysler will be receiving post bk. This is all a game of smoke and mirrors.
Both parties are complicit. The part I don’t get is the folks commenting on this story defending either Bush or Obama.
You guys need to pull your heads out and realize that Dems and Reps alike are looking out for their own special interests. Since the middle class has no lobbyists, it’s only those organizations with lobbyists whose interests will be looked after.
Bush took a lot of hits for being this way (neocons, Christian right, etc.), and Obama is proving that in this respect, he is indeed Bush’s 3rd term (UAW, banking institutions, etc.). It’s not that hard to see, unless you have your eyes closed.
“But Government, all government, has one built in flaw that eventually devours its heart. It has the inherit flaws of greed and self perpetuation.”
And how is the corporate world different in that regard?
The FCC and FDA are just regulatory agencies and do not run the businesses they regulate. Other than GM and the government printing office I cannot think of a business that the US government runs. Even in WWII the government only contracted with with businesses to produce war materials they did not have an equity position in those businesses.
There was a discussion a few days ago about quality in news media, and specifically about how surprised people were about the high quality of Al Jazeera.
Well, Al Jazeera (and Al Arabiya) are state-funded media. So is PBS/NPR, and the BBC. All display superior quality and professionalism in the area of news reporting over our private domestic counterparts. I think most would agree than accurate news is essential to democratic aspirations.
Now, these networks not as profitable as private media, but this example is specifically picked to show why and how publicly funded programs are often a better contributor to society than the alternative.
So, the point of the article is that scope of turning GM around is so large that only the government can do it??
There was no private funding lined up anyway, partly because of poor credit market, and partly because of the suckiness of GM/Chrysler, so it’s a moot argument. It’s either this or liquidation.
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If that’s the case, it certainly doesn’t marry up with the expedited ’special’ bankruptcy of Chrysler, parts of which were sold and parts that weren’t. Sounds like a Ch 7, not 11.
As has been mention here MANY times, and MANY places in the mass media, they used a sale specified in the Section 363 of federal BK code.
Anyone who desires to have an opinion worth reading should try to gain a minimal level of familiarity with cases conducted under those rules, which have properties of chap7 while allowing operations to continue.
—
In general, it’s best to try educating yourself using at least marginally academic sources of info. As a result of the inventiveness of Al Gore, there’s really no good reason not to.
+1 to Srynerson. The FCC was more about crony capitalism and outright theft of resources for politically tied big buisness.
Not that there are not US Gov success stories. The Shuttle being one of them. Even though it is “1960’s” (I beg to differ) technology, it works. Like your coffee maker, or Corolla, there is no need to change it. NASA should contract for mor to be built instead of chasing rainbows.
Look, all this politi-sizing aside, there really is no difference between the parties. Each are looking out for their friends (you know, those who pay them the most). Is it any wonder that during the telecommunications bill a few years ago, that AT&T was the largest lobby and bought both parties almost equally?
“Even in WWII the government only contracted with with businesses to produce war materials they did not have an equity position in those businesses.”
The present toying around with a few companies pales in comparison to the government’s network of agencies which managed US industry during the war. All resources were allocated by various central committees in Washington, including people. Nothing is more intrusive on the lives of citizens than a draft. A brief primer on how it was done:
http://eh.net/encyclopedia/article/tassava.WWII
dieseldude said: “While reading all this, I decided to register. I have been lurking here for about a year, and spend about a half hour catching up on this site every day. We have missed the point of this whole bailout discussion in this editorial and the arguments surrounding it. The point is not whether it will work or not, (personally I do not believe it will) the US Constitution is a contract between the government and the people. It lays out, for the most part, what the government can NOT do as well as its duties to the people. It also defines the duties of the three branches of government. I invite you to read this fine document with fresh eyes; it is easily found in many places on the web. This bailout, or actions of its like, are not provided for.(See the 10th amendment)I am not Obama bashing, this is a statement of fact. Obama, both the Bushes, the Clintons, and Reagan did things that were all outside the bounds of a document that they all swore to defend. This has become a way of life for our government. Either we must abandon the document that is the foundation of our Republic, or we must make fundamental changes in the way things are run. Under current circumstances, every president is a liar before he/she leaves the podium at the inauguration. I think this is a problem.”
Well said, and I fully agree.
I also believe that today (or possibly tomorrow) is America’s “Final final exam”.
We’re at a Y-junction. There is no going straight. To the left, we have dictatorship. To the right, we have the rule of law. There is no other choice before us as a nation.
Our fate, for now, is in the hands of the Supreme Court.
http://patriotroom.com/article/emergency-filing-chrysler-creditors-take-obama-to-supreme-court
John Horner said “GPS technology can be added to the success story list as well. To this day all of the satellites which enable the GPS system are bought and maintained with taxpayer money.”
Interestingly, before GPS, the Japanese offered a navigation system in cars which used no GPS at all. It relied upon a powered, tiny gyro and computer technology. It was set-up at the factory and calculated position by movement.
And it worked. Needless to say, it was for in-car use only and needed re-setting if the car was out of commission and brought back into service.
The Securities and Exchange Commission just smacks of total suc(k)(ex)cess.
The government has been dabbling in how to shape the automobile industry since the EPA, DOT and NHTSA. Has that made the industry more successful? Apparently not.
John Horner :
June 8th, 2009 at 1:20 am
“But Government, all government, has one built in flaw that eventually devours its heart. It has the inherit flaws of greed and self perpetuation.”
“And how is the corporate world different in that regard?”
John, you don’t know the difference between private and government sectors?
I know you are being funny, and you do, but come on.
Private industry is SUPPOSED to be greedy.
Capitalism is ALL about profit.
Not the government.
And its like Menno’s friend writes…the original intent of our framers was as LITTLE government as possible.
Again, I am from Illinois where 4 of our recent Govs are/will be serving time.
Another one party system gone ugly.
So don’t tell me about government.
And after all this time, you guys come up with NASA as proof the government is well run?
Look if NOT for government interference, our most recent program wouldn’t be one that was started on the late 70’s.
Now THATS government interference!
Look…
RF’s tried to explain in the interview.
All we ever get is doom stories of what would have happened if the gov did not do this.
But let’s ask ourselves…why did this all take place?
And would it have taken place IF there was a 2 party system in place in Congress?
Never.
There’s a lot to be said for gridlock!
Oh, for those days!
I will tell you why this happened.
Its all about power and jobs.
Jobs get votes and getting votes is what it is all about.Its not about doing whats best or right, its about YOU staying in office.
That’s the inherent self perpetuation that I tried to explain eats up every politician.
Michael Martinchek: The FCC did it right, allowing industry to flourish, without choking itself to death. Radio and television grew thanks to standards, not despite them. David Sarnoff, an early president of RCA said at the time, “Competition brings out the best in products and the worst in men.” The FCC did, and kind of continues, to mitigate the worst aspects of capitalism, while allowing the best to develop.
The FCC was created to ration a limited resource – the airwaves – to prevent multiple stations from broadcasting over the same airwaves in the same area. Completely different scenario.
Michael Martinchek: Similar arguments can be made for the Food and Drug Administration, the National Aeronautics and Space Administration and (ahem) the Federal Reserve.
Yes, and they have no relevance to the auto industry.
You’re making the mirror-image mistake of those who squawk “socialism” with every move by the federal government. Just because government intervention works in some cases doesn’t mean it will work in this one, or that it will bring order to a chaotic marketplace. (If anything, the right kind of chaos encourages creativity in the automobile market.)
We want one entity to control our money supply, and we want it to be done by the federal government, which, in theory, should be impartial and not prone to manipulating the money supply to allow one person to get rich. The Federal Reserve was created after J. P. Morgan (the man, not the company) had to personally bail out the U.S economy in 1908. We didn’t want one person to have that level of control over an economy that was transitioning from an agricultural base to an industrial one.
There is no indication that preserving this one entity – GM – to supply new vehicles will benefit consumers or save the economy, let alone the auto industry.
NASA exists because the undertaking – space exploration and travel – is so expensive and complicated that only the federal government can marshall the resources and will to do it effectively.
The same amount of effort and resources are not necessary to make a competitor to the Civic, Camry or 3-Series.
The Food and Drug Administration is a testing and regulatory body. Note that the development, manufacture and marketing of drugs is still left to private companies (although these companies do work government facilities to develop some drugs). The government isn’t propping up GM and Chrysler to test competitors’ vehicles. It already regulates vehicle design and pollution levels through other agencies.
Dynamic88: It’s all but impossible to imagine that the govt could do worse. The holy private sector has run GM into the ground – that fact alone is a good reason to believe the govt can do a better job. How could they do worse?
Your asking the wrong question. Private companies die all the time for a variety of reasons, including mismanagement. The question you need to be asking is whether car buyers need GM and Chrysler…and the answer, judging by sales trends, appears to be “no.” Unless they can get GM and Chrysler vehicles for next to nothing, which is hardly a good way for either company to turn a profit.
agenthex: There was no private funding lined up anyway, partly because of poor credit market, and partly because of the suckiness of GM/Chrysler, so it’s a moot argument. It’s either this or liquidation.
Last December, two arguments could be made in support of the bailout. One, we needed to prop them up to prevent a collapse of suppliers, which would hurt Toyota, Ford, Nissan, Hyundai and Honda.
Since that time, provisions have been made to protect the supplier base in the event of a GM and Chrysler collapse.
Two, the economy could not afford to take a hit in the wake of the collapse of Wall Street. Early indications are that the worst is over regarding the economy, and the recovery is slowly beginning.
By the end of 2009, they need to be cut loose. The Roger Penskes of the world will pick up the valuable parts.
If Fiat wants to enter the U.S. market, let it start putting its own money into Chrysler.
The rest of Chrysler and GM can just die a merciful death.
Unless we are going to look at both as social welfare projects designed to ensure that no one who works in the domestic auto industry ever loses his or her job.
Private companies die all the time for a variety of reasons, including mismanagement. The question you need to be asking is whether car buyers need GM and Chrysler…and the answer, judging by sales trends, appears to be “no.”
Dynamic can speak for himself, of course, but he was addressing the shrillness of the (obviously false) claims that the private sector always does a better job than does the public sector. He was pointing out that the private sector had already failed, so there was no way for the government to do worse than that.
Clearly, it’s possible that the government may do equally as poorly, but by definition, there is no way that GM or Chrysler could have done worse because they would have just gone out of business in Chapter 7 had they not been bailed out. That’s as bad as you can get, so at this point, the government can either do just as well as that
(fail, too, but later) or better.
In any case, the public-private schism is inaccurate. It’s obvious from the Chrysler-Fiat deal that the government’s goal is to avoid managing these companies if at all possible. They wisely want to have enough power so that they can try to get our money back, but they aren’t particularly interested in the day-to-day operations.
Carlos Ghosn is probably circling to get the best deal possible. After seeing the Fiat situation, he certainly will want as much DIP money as possible, with minimal financial commitment to either Renault’s or Nissan’s balance sheets.
PCH/Dynamic88:
Private sector companies exist to make money, i.e. create wealth. You are correct in that Chrysler and GM both failed in this endeavor because they operated on the wealth of their bondholders and creditors and largely destroyed that wealth through mismanagement and inefficiency.
Where the government can do worse than the private companies is by destroying far greater sums of wealth by allowing these wealth-destroying enterprises to continue churning long after the private holders have screamed “no more.”
On the other hand, inflation would be far worse if it weren’t for the fact that almost all of the recently-minted funny money were pissed into such black holes. If we shut down the black holes we’ll also have to shut down the printing presses.
And its like Menno’s friend writes…the original intent of our framers was as LITTLE government as possible.
*sigh*
There was no one intent of the framers. They were often bitterly divided over the role of the federal government. The 1790s were uber-partisan. They were not all Jeffersonians, not by a long shot
Pch101: It’s obvious from the Chrysler-Fiat deal that the government’s goal is to avoid managing these companies if at all possible. They wisely want to have enough power so that they can try to get our money back, but they aren’t particularly interested in the day-to-day operations.
I’m not worried about the government meddling in the day-to-day operations of GM and Chrysler – although Rep. Barney Frank’s action regarding the closure of a GM warehouse in his home state isn’t a good sign.
I’m worried that these companies will require regular injections of taxpayer money to stay afloat. It’s not as though GM will have an all-new lineup when it emerges from bankruptcy, and the new models I’ve seen are unlikely to start a stampede to GM showrooms.
How many times did we hear that the new models “just around the corner” would regain all of that lost marketshare for GM? I can hear the new mantra – this latest injection of federal money will get GM back on its feet, and finally make it viable.
Pch101: Carlos Ghosn is probably circling to get the best deal possible.
In which case, I hope he makes his move this year, and I wish him well.
By the end of 2009, they need to be cut loose. The Roger Penskes of the world will pick up the valuable parts.
Unfortunately that may not happened because it’s way of politics. Wouldn’t want to get labeled as a flip-flopper, right?
The unfortunate part is that in our political atmosphere, politician end up having to lie even if they want to do the right thing. It’s also a place where it’s easier to maintain the status quo where much goes wrong.
Since we’re not mature about the nature of the private-public relationship, we elect and create policies which reflect this.
For example, the word “regulation” has become completely stigmatized for propaganda purposes. At a basic level, we appreciate the need for equalizers even in sports in order to keep things competitive of all places (rules/player’s union!/salary cap!), and I think most would agree it’s generally increased the level of play. Kind of makes you wonder how our real problems are solved with less pragmatism than our recreational ones.
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On the other hand, inflation would be far worse if it weren’t for the fact that almost all of the recently-minted funny money were pissed into such black holes. If we shut down the black holes we’ll also have to shut down the printing presses.
It’s great that people would finally admit the private sector is far more efficient at creating black holes for wealth.
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They wisely want to have enough power so that they can try to get our money back.
I’ve pointed out before how interesting it was that the masses were directed to hate the auto deal more partly because the gov (us) actually got some ownership for its money, contrasted with the banking bailout where we’re getting jack shiit for massive handouts.
I guess the only consolidation is that the auto equity will prolly be worth about as much as the MBS’s we’re getting.
@BDB
I made no reference to the “intent of our framers” please reread if you like. I solely spoke to the document which they left us.
Thanks
I solely spoke to the document which they left us.
No, you really didn’t. You misread the Constitution and editorialized with your own biases and hopes for the document.
The constitution is silent on these matters. The bailouts are neither specifically constitutional nor unconstitutional.
Read Article 1, Section 9, and you’ll find absolutely nothing on that list of restrictions that is being violated here. So you’d be wrong to argue that it is prohibited on that basis.
Amendment 10 says that rights are delegated to the people. It says nothing at all about these bailouts.
We can all have our opinions about the bailouts, but the distortions and misinterpretations of the Constitution are unnecessary. Just because you dislike something doesn’t mean that it’s unconstitutional. You need to prove that point if you wish to make it, and you haven’t done that at all.
I made no reference to the “intent of our framers” please reread if you like. I solely spoke to the document which they left us.
I don’t get the logic that claims that we must follow the constitution as it was intended in the 1700’s. They developed a set of rules which would work well for their time. I would think they’d want us to do what is best for ours.
A lot has happen in the last couple centuries.
The document they left us can be interpreted many ways. Even the people who wrote it interperted it in different ways. The ink wasn’t dry before they were arguing over whether central banking and protective tariffs were constitutional or not.
My point is we’ve ALWAYS, since the beginning of the country, had a party that wants a strong and activist central government and one that doesn’t. There’s nothing un-American about either position.
Dieseldude, actually the case that Congress has the power to bailout GM is pretty strong, in my opinion. It’s under the Interstate Commerce clause. If Congress can justify civil rights legislation, banning grow-your-own marijuana, etc. under Interstate Commerce, they can certainly justify a “loan” to the car companies. It has some defense implications, too.