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  • From: bob ford <bobford79 AT yahoo.com>
  • To: homestead AT lists.ibiblio.org
  • Subject: [Homestead] Auto / Corporate Bail-outs
  • Date: Thu, 13 Nov 2008 23:53:39 -0800 (PST)

David Brooks, a slightly left -leaning Republican columnist for the NYT, has
this commentary on why the Auto company bail-outs not only will not work but
will set bad precedent in the country's march toward corporatism.

I think the Republicans in congress have finally wised up about this bail-out
non-sense; but they no longer have any power. This auto bail-out will go
thru for no other reason than that the UAW and the corporate entities
themselves give lots of money and volunteer time to the controlling
democrats......bobf

------------------------------------------------------------------------


Bailout to Nowhere

By DAVID BROOKS
Published: November 14, 2008

Not so long ago, corporate giants with names like PanAm, ITT and Montgomery
Ward roamed the earth. They faded and were replaced by new companies with
names like Microsoft, Southwest Airlines and Target. The U.S. became famous
for this pattern of decay and new growth. Over time, American government
built a bigger safety net so workers could survive the vicissitudes of this
creative destruction — with unemployment insurance and soon, one hopes,
health care security. But the government has generally not interfered in the
dynamic process itself, which is the source of the country’s prosperity.

But this, apparently, is about to change. Democrats from Barack Obama to
Nancy Pelosi want to grant immortality to General Motors, Chrysler and Ford.
They have decided to follow an earlier $25 billion loan with a $50 billion
bailout, which would inevitably be followed by more billions later, because
if these companies are not permitted to go bankrupt now, they never will be.

This is a different sort of endeavor than the $750 billion bailout of Wall
Street. That money was used to save the financial system itself. It was used
to save the capital markets on which the process of creative destruction
depends.

Granting immortality to Detroit’s Big Three does not enhance creative
destruction. It retards it. It crosses a line, a bright line. It is not about
saving a system; there will still be cars made and sold in America. It is
about saving politically powerful corporations. A Detroit bailout would set a
precedent for every single politically connected corporation in America.
There already is a long line of lobbyists bidding for federal money. If
Detroit gets money, then everyone would have a case. After all, are the
employees of Circuit City or the newspaper industry inferior to the employees
of Chrysler?

It is all a reminder that the biggest threat to a healthy economy is not the
socialists of campaign lore. It’s C.E.O.’s. It’s politically powerful crony
capitalists who use their influence to create a stagnant corporate welfare
state.

If ever the market has rendered a just verdict, it is the one rendered on
G.M. and Chrysler. These companies are not innocent victims of this crisis.
To read the expert literature on these companies is to read a long litany of
miscalculation. Some experts mention the management blunders, some the union
contracts and the legacy costs, some the years of poor car design and some
the entrenched corporate cultures.

There seems to be no one who believes the companies are viable without
radical change. A federal cash infusion will not infuse wisdom into
management. It will not reduce labor costs. It will not attract talented new
employees. As Megan McArdle of The Atlantic wittily put it, “Working for the
Big Three magically combines vast corporate bureaucracy and job insecurity in
one completely unattractive package.”

In short, a bailout will not solve anything — just postpone things. If this
goes through, Big Three executives will make decisions knowing that whatever
happens, Uncle Sam will bail them out — just like Fannie Mae and Freddie Mac.
In the meantime, capital that could have gone to successful companies and
programs will be directed toward companies with a history of using it badly.

The second part of Obama’s plan is the creation of an auto czar with vague
duties. Other smart people have called for such a czar to reorganize the
companies and force the companies to fully embrace green technology and other
good things.

That would be great, but if Obama was such a fervent believer in the Chinese
model of all-powerful technocrats, he should have mentioned it during the
campaign. Are we really to believe there exists a czar omniscient, omnipotent
and beneficent enough to know how to fix the Big Three? Who is this deity?
Are we to believe that political influence will miraculously disappear, that
the czar would have absolute power over unions, management, Congress and the
White House? Please.

This is an excruciatingly hard call. A case could be made for keeping the Big
Three afloat as a jobs program until the economy gets better and then letting
them go bankrupt. But the most persuasive experts argue that bankruptcy is
the least horrible option. Airline, steel and retail companies have gone
through bankruptcy proceedings and adjusted. It would be a less politically
tainted process. Government could use that $50 billion — and more — to help
the workers who are going to be displaced no matter what.

But the larger principle is over the nature of America’s political system. Is
this country going to slide into progressive corporatism, a merger of
corporate and federal power that will inevitably stifle competition, empower
corporate and federal bureaucrats and protect entrenched interests? Or is the
U.S. going to stick with its historic model: Helping workers weather the
storms of a dynamic economy, but preserving the dynamism that is the core of
the country’s success.

http://www.nytimes.com/2008/11/14/opinion/14brooks.html








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