This piece was written by Rob, a close personal friend of mine. It appeared in his blog “Be A Producer” on Friday August 29, 2008. For the record, I agree with him, which is why I have reprinted this article here. And now...
When did all the capitalists become socialists? GM is telling the Congress that it is “deserving” of $50 billion in government backed loans so that they can retool to build more fuel-efficient cars. They are pushing Congress to appropriate $3.75 billion to back the $25 billion in loans authorized last year. And now they want double that amount, citing the sudden jump in consumer demand for fuel efficiency.
Their problem is that the plants they currently own are too weighted towards large truck and SUV production, while demand is for smaller cars and crossover vehicles. Guess what guys, it’s called the free market. Adapt or die. There’s a reason why they can’t get a loan on their own: no investor wants to loan them all that money just to watch them go bankrupt.
The American auto industry is not deserving of government loan guarantees any more than any other industry that made such bad strategic blunders as GM and Ford have over the past decades. They put all their eggs in the gas-guzzler basket, despite having made exactly the same mistake in the 1970s.
If we, as a country, truly believe in capitalism, we let them go broke so other companies can thrive. However, if we believe in using tax money to prop up failing businesses, then we believe in corporate socialism. I’ll reiterate what I’ve said in previous posts; America is currently socialist when it comes to corporate losses and citizen profits, but it’s capitalist when it comes to corporate profits and citizen losses.
These handouts, bailouts, and tax breaks are distorting businesses and wealth in America. Companies used to have to take risks and build sustainable business models. Now they can pursue whatever stupid, short-term venture they wish since any loss they take will be buffered, if not completely covered, by taxpayers. This is why “too big to fail” is a reprehensible precedent to set. It would be ridiculous to do this for small or medium sized businesses. If your business cannot turn a profit, you lose. Start over, try again. It’s evolution, baby.
Let GM fail. It’s for the best. I know it hurts in the short term, but it is necessary for our country to move forward. I understand that this will put autoworkers out of work. It’s not just GM’s corporate executives that are pushing for this bailout, it’s also the United Automobile Workers union. Of course, Michigan’s lawmakers are all fully supportive of this bailout. And I’m guessing that Congress will eventually bend over and let them have all the money they ask for. It’s a hard coalition to beat with big-business-welfare Republicans and pro-union Democrats uniting to push this rape of the American taxpayer through congress.
I like GM. They have provided millions of jobs throughout the world for people. They are a big part of American culture. But they are also the guys who showed us what planned obsolescence really means. Years of building shitty cars across all their makes and lack of vision for more than a fiscal quarter ahead are inexcusable. If GM fails, it's because they don't understand how to run a business or build quality cars. No one in their right mind should give them a loan, and that includes the American taxpayers. The corporate executives who led the company to this point, and who are paid and compensated at order’s of magnitude more than their employees, need to admit their failings.
The falloff in truck sales has been devastating to the Detroit automakers because those vehicles historically have generated the most profit. GM’s vice chairman, Robert Lutz, on how to deal with the loss of profits from truck sales, said small cars would become considerably more expensive, filling some of the void created by the evaporation of big profits from trucks. I’m guessing that Honda or Toyota won’t be matching this increase in the price of their small cars. This means that GM’s small car will cost more, and since they are already seen as lower quality than the Asian automakers’, sales will drop to near zero. Sounds like a great idea. Here take this huge, taxpayer-backed loan.
Be A Producer - http://rrhproduce.blogspot.com/
This Article - http://rrhproduce.blogspot.com/2008/08/corporate-socialism.html
Related Reading - http://rrhproduce.blogspot.com/2008/07/blog-post.html
Related Reading - http://rrhproduce.blogspot.com/2007/11/foggy-with-chance-of-economic-collapse.html
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