We now see the consequences of government bailouts and “too big to fail”:
I think anyone who owns auto-sector debt (whether directly or through a pension or life insurance policy) should be very concerned — they can only find their interests made subject to the political interests of organized labor. Further the American people should probably also be concerned, as we will continue to support with tax dollars a company that has simply proven itself incapable of competing in a free market for the last several decades.
Secondly, we should all be very, very concerned that the White House had decided that it is within its writ to decide who the captains of industry are. The CEO of any company should be chosen by its Board, as elected by its shareholders. The shareholders of GM have just been disenfranchised by a Presidential phone call.
Chief Executives being chosen by politicos is probably common in China or Russia, but those are not countries we want to be emulating. I do not like this at all.
Neither do I. And there’s a word for it.
It starts with “f.”
[Update a few minutes later]
Kaus: Obama’s Diem?
And Lileks twitters: “Maybe I’m old-school, but ‘President fires CEO’ looks as wrong as ‘Pope fires Missile.’ Does not compute.”
[Noon update]
More on why this is such a bad idea:
GM is now Obama’s company. If it closes, it will be on his say-so. But Obama is a politician, not a CEO. So his first concern is to avoid bad political fallout, which means he will prop up the company for as long as it takes, regardless of what makes economic sense. This, in turn, will likely make the company either less economically sound or, it will rebound — but only by getting special breaks other companies won’t get. Either way, bad practices will be rewarded and/or good practices will be punished. More firms will see that gaming Washington pays off and the cycle will continue.
Of course, the good news is that being a law professor and community organizer totally prepares you to run huge white elephant multinational corporations.
The country’s in the very best of hands.
[Another a couple minutes later]
The first quid pro quo for the government giving you money (or “investing”, as President Obama and David Brooks say) is that it gets to regulate your behavior. Not just who sits on your board or (see Sarkozy last week) where your factory has to be. When the government “pays” for your health care, it reserves the right to deny (as in parts of Britain) heart disease treatment for smokers or hip replacement for the obese. Why be surprised? When the state’s “paying” for your health, your lifestyle directly impacts its “investment.”
The next stage is that, having gotten you used to having your behavior regulated, the state advances to approving not just what you do but what you’re allowed to read, see, hear, think: See the “Canadian Content” regulations up north, and the enforcers of the “human rights” commissions. Or Britain’s recent criminalization of “homophobic jokes.”
You’d be surprised how painlessly and smoothly once-free peoples slip from government “investing” to government control.
There is such a thing as American exceptionalism, but the current regime is doing everything possible to obliterate it as quickly as possible. Don’t think it can’t happen here. It can, if we let it.
[Update a few minutes later]
OK, one more — the fascist bargain:
The fascist bargain goes something like this. The state says to the industrialist, “You may stay in business and own your factories. In the spirit of cooperation and unity, we will even guarantee you profits and a lack of serious competition. In exchange, we expect you to agree with—and help implement—our political agenda.” The moral and economic content of the agenda depends on the nature of the regime. The left looked at German business’s support for the Nazi war machine and leaped to the conclusion that business always supports war. They did the same with American business after World War I, arguing that because arms manufacturers benefited from the war, the armaments industry was therefore responsible for it.
It’s fine to say that incestuous relationships between corporations and governments are fascistic. The problem comes when you claim that such arrangements are inherently right-wing. If the collusion of big business and government is right-wing, then FDR was a rightwinger. If corporatism and propagandistic militarism are fascist, then Woodrow Wilson was a fascist and so were the New Dealers. If you understand the right-wing or conservative position to be that of those who argue for free markets, competition, property rights, and the other political values inscribed in the original intent of the American founding fathers, then big business in Fascist Italy, Nazi Germany, and New Deal America was not right-wing; it was left-wing, and it was fascistic. What’s more, it still is.
What’s amazing is how blind they are to it.
[Update after noon]
I feel much better now:
…starting today, the United States government will stand behind your warrantee [sic].
Yes, because, you know, that’s the proper role of the federal government under the Constitution. To stand behind GM owners’ warranties. To provide for the care-free pursuit of car ownership.
[Late afternoon update]
He who pays the piper calls the tune. If it makes you feel any better (probably not) the phrase “structured backruptcy” appears several times in the Government’s six-page deal summary.
I personally think this is Obama’s way of saying to all parties “make a deal or the bankruptcy court will.”
He could have sent that message without firing Wagoner (e.g., he could have said “make a deal or the bankruptcy court will”). Why does Gettelfinger keep his job?
The company should have gone into bankruptcy last year, before taxpayers’ money went down the rat hole, and before it became essentially nationalized.
Given that choice, the CEOs should choose bankruptcy court, which has the advantage of being sanctioned by existing law.
Rand,
They aren’t blind to it. They are ignoring these inconvenient aspects of history, so as to gain more political and cultural power than they otherwise would.
Another aspect of the Democrat party’s history it ignores is the overt racism of Virginia’s Wilson, or the objectively racist policies of Roosevelt’s National Recovery Act.
For leftists, Orwell’s “1984” is a construction manual, not a cautionary tale.
Why does Gettelfinger keep his job? Because the UAW didn’t take boatloads of cash from the Federal government.
Because the UAW didn’t take boatloads of cash from the Federal government.
Of course it did. Do you think that the workers would have been paid (and paid their union dues) without the bailout? They just took their boatloads of cash via GM and Chrysler as a conduit.
boatloads of cash via GM and Chrysler as a conduit. Ditto bondholders and suppliers. It’s the same logic as firing the coach of a loosing sports team – changing the coach won’t immediately change the players, but it will result in a different strategy.
Has anyone noticed the GM truck ads recently? They’re hitting the country’s aging infrastructure – and therefore lining up on side of the spending bills. So I would add, besides controlling the corporations, the fascists also get a propaganda bonus.
Chris is absolutely right on this, the guy who pays the bills sets the rules, and should. He’s he one with “skin in the game,” as they say. Why shouldn’t the government pick the CEO, if it’s their money at risk here?
Of course, it’s a little hard to reconcile that with the tax philosophy of the New Left, as incorporated in the Obama Administration, which is that the people who are actually paying for all the government spending we’re seeing — those “rich” taxpayers who are funding most of the Federal budget — don’t call the shots, and won’t be, because they’re (by definition!) in the minority.
Instead, it will be the majority — those not “rich” — who set the rules for how other people’s money will be spent. For example, I personally will be sending roughly $100 this year to bail out GM. But more than half of all American voters will be sending $0, and they have far more say in where my $100 is going than I do.
That’s progressive!
How Chris maintains both attitudes simultaneously without his head exploding is a mystery to me.
Incidentally, I think Goldberg’s take, quoted by Rand in the post, is wrong. Obama is a better politician than businessman, and I suspect he’s judged the politics of this correctly.
Your generic American wage slave is troubled by all this government spending on GM, a whipping poster boy for American corporate clumsiness since at least (in my personal memory) 1975. For many reasons, he doesn’t like all this Treasury cash flowing to companies. But Obama can reconcile Joe Voter to it, if he can convince Joe he’s cleaning house at the same time, being “tough,” making sure the money is well spent by firing the old, corrupt, leadership that got the company into this mess. (Yes, I know, GM’s mess had just about zero to do with GM, and everything to do with the collapse of the credit market; as Rand has pointed out often, GM is a credit company that has a side-interest in manufacturing and selling cars. But we’re talking social myths here, not reality.)
So I think the defenestration of Wagoner will make more Joe Voters happier with Obama sending money to Detroit. Politically, I think he’s judged it nicely.
But the fact that neither Obama nor his Treasury people nor really anyone on his staff or within reach of his ear is an actual businessman, or has even successfully run any kind of profit-making enterprise, is significant. From a business point of view, this decision is insane. It seems very likely to do much to wreck GM’s chances of actually surviving. The professionals agree, of course, which is why GM’s stock lost 30% of its value after Obama made his announcement.
Goldberg and Kaus think that the now inevitable crump of GM will redound negatively to Obama, that he’ll pay a price for its collapse because he “owns” it. I don’t think so. I don’t think average voters will make that connection.
But the business folly is deadlier than it looks. The fact that GM will fail is not the big problem; the problem is what this and all the other political meddling will do to business in general. You see all the banks eager to give TARP money back now; you see the reluctance of anyone who knows WTF he’s doing in the world of finance to work for Geithner, or any of the bailed-out government-supervised (one might say government-oppressed) financial institutions. No expert in his field wants to be second-guessed by some clueless arrogant noob in the Oval Office, who got where he is by being handsome, articulate, black, a bit of Chicago-style vicious politics, and reading speeches of the TelePrompTer with wonderful expressiveness. So these people are, and increasingly will be, saying thanks but no thanks to working with Team Obama.
That means the economy balkanizes into that part managed rather completely by Team Obama, and that part still free, and that the two are at cross-purposes. That is not good for the economy as a whole. Furthermore, unless Team Obama can cripple the free economy with repressive regulation and tax policies — which, to be sure, they will try their utmost to do — the incompetence in the government-supervised sector will become increasingly obvious.
Unless Team Obama can make sure the ruination in every economic sector the government touches spreads to the entire economy, so they can plausibly blame it Soviet-style on wreckers and saboteurs and the Bush legacy or some other Great Satan, people are going to notice the government’s anti-Midas touch, and that may not work out so well for Obama in 2010 and 2012. We shall see. This struggle is not new, we’ve met all the players before, and history teaches us that the outcome, i.e. whether liberty or fascism wins, is always too close to call.
I can’t help but think that Obama is following the Alinsky-era adage of “things have to get worse before they can get better” — we must tear down the old structure, comrades, before we can construct the new society that we all desire! This works with individual humans, in situations that range from boot camp to est seminars, but it’s a little more difficlt with entire societies.
Obama has a high opinion of himself. I don’t doubt that, if this is his strategy, he’s capable of doing the first part. But I don’t think he’s anywhere near competent enough to do the rebuild after the teardown. I wish he had practiced by unscrambling eggs first.
Mike,
Tearing people down — e.g., boot camp or EST — can also really backfire. Basic training in the Army clearly backfired with regard to me. Instead of getting a good soldier, they got a funny physicist.
Honest, open, democratic (as opposed to authoritarian) leadership actually works better for most things.
EST? I consider that bunch to be a sick cult.
“He who pays the piper calls the tune.”
So if this is how you feel, then when a business owner is negotiating a new union contract and decides he’s the piper and tells them to take a hike you’re okay with it.
Bill Maron – well, that’s called “trying to bust a union.” It’s legal, last I checked. It’s also legal for the union to picket the business.