Maybe it's because I'm getting old, but I remember a time when people thought a capitalist economy was a good idea. Now all we hear about is throwing public money at struggling companies that are for some inexplicable reason considered 'too big to fail'. Isn't one of the inherent strengths of a capitalist system that bad companies die and good ones survive? If companies like GM, Ford, Goldman Sachs, Lehman Bros, etc. etc. make such awful decisions that they enter or teeter upon bankruptcy, then why should we give them money to keep doing what they've been doing, namely failing, and dragging us all down with them? To borrow from another form of transportation and quote the movie Airplane! , "they bought their tickets, they knew what they were getting into. I say let 'em crash."
Instead, we institute rules like this new model of kids' sports where nobody keeps score to avoid hard feelings. I don't understand the point of a game with no winners or losers any more than I understand the idea that GM can't be allowed to destroy itself. If you have a compelling argument, please share it with me. I'd love to have a lively debate on the topic, because I'm sure I would learn something. So many smart people are endorsing this approach that I feel like I must be misunderstanding something.
For example:
General Motors Corp Chief Executive Rick Wagoner's salary and other compensation rose 64 percent in 2007 to about $15.7 million, mainly due to option grantsSo GM needs a handout? They pay their CEO 15.7 million dollars after they report record losses, and we are supposed to think that GM's survival is essential to our collective economic welfare?
...
GM, which reported a record $39 billion net loss in 2007, released the figures in a proxy statement on Friday afternoon that was filed with the U.S. Securities and Exchange Commission.
Same goes for the rest of them. It's the same story, over and over. Enron accounting practices and Bush-like management decisions somehow catch up to you. Who'd've thunk?
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What irks me more than anything is the way that left websites and orgs like MoveOn, ActNow, etc. wanted us to raise a ruckus about the bank bailouts, but I have not heard any opposition about this bailout from those groups? Could it be that not having cars companies fail is more important that having banks fail and could this be the proof we are addicted to cars and oil.
Good point. Perhaps a mere $50 Billion is considered a trifle these days. Chump change.
While I agree with your sentiment, and it angers me to reward companies that have spent the last couple decades building SUV's instead of fuel-efficient cars, there's two reasons to help them anyway.
1. While the U.S. auto industry employs "only" 355,000 people directly, it is responsible for the employment of 4.5 million people in downstream industries.
2. If we ever are going to build fuel-efficient cars in this country, we need an infrastructure to do so. The existing auto companies have that, and replacing it would almost certainly cost more than bailing out the auto companies.
I'm glad you made those points.
I can't argue with the fact that there are many jobs at stake. I do have to wonder, though, whether simply throwing cash at failing companies like Ford and GM is really the best way to maintain those jobs, particularly if that money is given with no strings attached. If the same executives continue to make the same stupid decisions that got them into this mess while simultaneously rewarding themselves with big fat bonuses, then it seems to me you're not really saving those jobs at all, because they are sure to be doomed.
I disagree that we need an infrastructure to build a new generation of fuel-efficient cars. All you need for that is a retooled plant, and that's not something the government should be in the business of financing.
What if, instead of simply giving $50B to Ford and GM, we spent $50B on a REAL infrastructure project, like a new electrical grid and/or a couple of large geothermal power plants? That would be plenty of money to get a good start, and would simultaneously address the employment issue.
It is clear that an updated power grid is essential to our long-term energy independence and economic well-being. It is absolutely NOT clear to me that the survival of Ford and GM are similarly necessary.
Point 1: Er, I don't see what that has to do with reality. In the real world we're running up against peak oil, a collapsing global economy and an anemic American dollar. Paying uncompetitive companies to keep cranking out crap that no one wants doesn't seem like a solution to any of the above problems. The fact is, fewer cars will be bought going forward. I'm not a Kunstler-style doomer, but I do know that our fundamental economy is changing; it has to change. I'm sure there was a hue and cry when the powerful buggy and tackle industry was going bust at the turn of the century, but them's the breaks. The world is changing, and dumping billions of dollars into shooting our pet dinosaurs up with steroids isn't going to help (where the fuck did that messed up analogy come from??).
Point 2: The car companies will go bankrupt, assuming we're not total chumps and we let them fail on their own merit. They will restructure, lay off thousands of workers and close plants. It will suck horribly, and I don't even want to think of what will happen to the towns that depend on the plants to stay economically healthy. However, the companies will not simply disappear. Bankrupt companies don't explode into a cloud of pixie dust, and the car companies will continue to plague us for another hundred years. If they're keen on producing an efficient fleet, they'll have opportunities to do so. My guess is that they'll keep fucking up like they always do, chasing short term profits at the expense of long term stability, but what do I know.
Anyway, I have an idea of what to do with that 75 billion dollars that Congress wants to throw down a hole - give it to the people who get laid off. We talk about wanting to create a new, carbon-free economy with shiny new fields of quiet, zero carbon power plants, but whine about not having the money and manpower to do it. We have tens of thousands of skilled workers who have spent their lives working with robotic manufacturing, and we have 75 billion dollars. Hmm, I wonder what we could do with those two things?
Also, holy shit Dave, we should get married or something. We have so much in common. I have bad news about having the ceremony in San Fransisco though...
;)
One more point. The market cap of GM is currently 1.76 billion. See here: http://finance.google.com/finance?client=ob&q=NYSE:GM
Would it really make sense to pitch tens of billions of dollars at a company you could buy for less than 2?
Ironically, this is one Bush was against, and Obama is pushing for.
I predict Jennifer Granholm gets a cabinet position.
Those are all fair points, and in the long run I'm sure they're mostly going to prove correct. In the short term, however, President Obama will need to attempt to prevent the current recession from becoming a depression, or there won't be enough money around to do much of anything that desperately needs doing.
In the short-term interest of avoiding a depression, throwing 4.5 million additional people out of work, on top of the already-dismal job market, seems like a bad way to approach things if we want to avoid that spiralling-out-of-control feeling. Of course, if the only thing we do is give automakers money, we might as well not bother.
So yes, most of those jobs are doomed in the long term, but right now we don't have any alternatives ready to go so that people can keep putting food on their families. If the bail-out is part of a transition to other arrangements rather than the sum total of the fix, it's probably not the worst thing we could do.
On the other hand, if the bail-out is just money + business as usual, it's a waste of an awful lot of money.
Here, FWIW, is what the Kunstler types think about the prospect of GM going tits-up.
http://www.lifeaftertheoilcrash.net/Archives2008/GlobalResearchGeneralMotorsBankruptcy.html
So -- if I read that correctly, it seems that GM is pretty much screwed no matter what.
It's hard to imagine a happy ending for GM, but if one does come to be, it will have to be the result of a radical change rather than pumping money into the company in a vain attempt to maintain the status quo. I don't know what the answer is, and I'm not even sure there is one. I do like Paul's idea, though. Buy the company for $2B, which would free up at least $20B in bailout money to keep all those people employed for a while. What to do with them, I'm not sure, but it would have to be a public infrastructure project of mammoth proportions. Perhaps a combination of more efficient engine R&D and something related to a new power grid.
What if your car could be your home's backup generator? It will certainly take some serious creativity and drive to keep GM alive and save all those jobs. If that LATOC article clarifies anything, it's that GM cannot survive in its current incarnation.
Maybe the GM employees could be put to work building train cars. We'll need a lot of them when long distance car/semi travel becomes impractical. Assuming we build more railroad tracks between now and then.
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