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For Those Who Doubted Me When I Said We Are Heading Towards A European-Style Corporate State

I predicted it here.  Now see it here:

House Speaker Nancy Pelosi said Wednesday that Congress is considering bailing out Detroit’s Big Three automakers.

"We may need to make a statement of confidence in our auto industry," Pelosi told NPR this afternoon. "We’re not saving those companies, we’re saving an industry. We’re saving an industrial technological and manufacturing base... It’s about jobs in America."

Pelosi held a meeting Monday with Democratic leaders to consider a request from Detroit’s Big Three automakers for another $25 billion in "bridge financing" to help them survive a huge downturn in auto industry.

I wrote why its better to let GM fail.

So what if GM dies?  Letting the GM's of the world die is one of the best possible things we can do for our economy and the wealth of our nation.  Assuming GM's DNA has a less than one multiplier, then releasing GM's assets from GM's control actually increases value.  Talented engineers, after some admittedly painful personal dislocation, find jobs designing things people want and value.  Their output has more value, which in the long run helps everyone, including themselves.

The alternative to not letting GM die is, well, Europe (and Japan).  A LOT of Europe's productive assets are locked up in a few very large corporations with close ties to the state which are not allowed to fail, which are subsidized, protected from competition, etc.  In conjunction with European laws that limit labor mobility, protecting corporate dinosaurs has locked all of Europe's most productive human and physical assets into organizations with DNA multipliers less than one. 

Posted on November 6, 2008 at 11:37 PM | Permalink

Comments

"The alternative to not letting GM die is, well, Europe (and Japan). A LOT of Europe's productive assets are locked up in a few very large corporations with close ties to the state which are not allowed to fail, which are subsidized, protected from competition, etc. In conjunction with European laws that limit labor mobility, protecting corporate dinosaurs has locked all of Europe's most productive human and physical assets into organizations with DNA multipliers less than one. "

It's rather the definition of American auto industry.

Posted by: Dark vador | Nov 7, 2008 4:15:37 AM

At this point, I'm not sure there is much that can be done for the big three. At least one of them is going to fail anyway; so in essence we'll be throwing good money after bad.

Posted by: ElamBend | Nov 7, 2008 5:24:40 AM

I love how a bailout is supposed to be "making a statement of confidence." Truly these people have no shame.

Posted by: Joshua | Nov 7, 2008 6:29:27 AM

My brother works at Chrysler. He was told that every salaried employee is being offered a package with no limit on how many people can take them. It is X$ based on years of service, 6 months of health coverage and a $25K voucher for a car or you can keep the one the company issued you. Packages go out the Monday before Thanksgiving and are returned the Wednesday before. Imagine trying to run a plant when you don't know how many managers you're going to have show up the Monday after Thanksgiving. He fully expects Chrysler to go under in very short order. GM and Tata are already making noises about buying the plants.

Democrats will prop up these companies because they are beholden to Big Labor. Letting them fail would be a huge blow to the UAW. As the Big Three go, so goes the UAW.

Posted by: Duffy | Nov 7, 2008 8:23:26 AM

I take issue with your statement about "talented engineers -- after some admittedly painful dislocation -- find jobs designing things people want and value..." I'm not at all sure that is a correct statement. I don't have any more "facts" that you do, but I've seen plenty of dislocated tech workers in North Texas have to find something else entirely different to do, and not nearly as creative or lucrative, as their previous job. "Admittedly painful" means loss of health benefits, strained and broken families and possible psychological issues. Successful entrepreneurs like yourself are few and far between -- and so its easy to talk about someone else having to suffer when you yourself probably won't ever have to.

That's essentially the same attitude our politicians have -- no matter what happens to the economy and how people's lives are effected, the politicians will still have a job and benefits -- they don't have to experience the pain the rest of us go through so the ill effects of bad policy don't matter to them.

Yeah, I know, life's tough, there are no guarantees and "that's the way the cookie crumbles".

Posted by: Sedulous | Nov 7, 2008 8:49:41 AM

GM will fail.

Primarily because of shoddy product/confused marketing overlap, but also due to union bennie bloat, and healthcare cost inflation.

Ford is in a similar sinking ship – they’re a healthcare company that builds cars…

Posted by: Mesa Econoguy | Nov 8, 2008 9:52:02 AM

We watched this saga in Britain a generation ago - there is no need to guess the future on this one, just read the history. We still have lots of car factories, but owned by Japanese, French or German firms, and making cars that customers want. Of course, any firm that built a new car or engine factory was careful to avoid areas with a history of car manufacture; the skills of the existing labour force evidently had a negative value.

Posted by: dearieme | Nov 10, 2008 7:43:46 AM

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Posted by: Fred Mesinas | Jul 25, 2011 2:20:04 AM

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