June 3rd, 2009

The Government Motors of the Economy

photo credit: Mike Licht

For his entire adult life, with the exception of a few years of military employment, my grandfather worked for General Motors. His father had worked there as well, both adding their contributions to a growing industry through an innovative, respected company. Known for his problem-solving capabilities and management experience in running the Seville assembly line, he was most proud of his work with the Cadillac brand. He took early retirement after a dedicated career spanning almost four decades.

Were he still alive, you might imagine his reaction to the recent news story describing the individual who now helps to call the shots for this pillar of American industry: a 31-year-old law school dropout. This single story is Atlas Shrugged come to life—the nationalization of private industry deemed too important to fail (all in the “public interest”) and placed in the hands of unqualified politicians and their friends. Truly, it pays to know people in high places; inexperienced, power-seeking bureaucrats thrive on executive appointments, government takeovers, and “emergency situations” in order to rise to the artificially-created occasion.

Prior to its declaration of bankruptcy, GM had received $20 billion from Uncle Sam (this amount ignores, of course, the billions of dollars thrown at other car manufacturers, and the additional $30 billion still to be “invested” into GM). With 243,000 employees, this amount represents $82,304 per person—a staggering sum that, in the aggregate, adds up to a lot of malinvested money. But inflationary investments aside, the American taxpayers must come to terms with the fact that Obama bet the industry on his ability to infuse hope into the economy, doubled down, and lost. Suddenly those $640 government-approved toilet seats pale in comparison.

And so, in unprecedented fashion, the federal government has intervened into the private sector not only to inflate and prop up, but to manage, regulate, and control. Any pretense or promise of cleaning up GM’s balance sheets and returning it to private hands should be rejected as dodging the fundamental argument that is, of course, institutionally ignored: what authority does the government have to take over a private company? Dismissive claims of the necessity of doing so are ignorant at best, and hope-induced delusions at worst.

The “Government Motors” now created with the taxpayers60% ownership is but a visible reminder of what has long been a subtle, pervasive reality. While observant individuals understand the repercussions of government involvement in the economy, their less insightful countrymen will now be treated to a display of guaranteed incompetence and politicking—a demonstration that “political intervention in private business is an invitation for the most brazen sort of corruption”.

Thus, the new “Government Motors” is simply a tangible manifestation of the government’s motors of the controlled economy; a steady stream of subsidization, regulation, taxation, and legislative manipulation are the tools wielded by tax-feeding central planners who lust for control over your wallet. Contemptible though it may be, the government’s aggressive action to take over an industry and control its future brings into sharp focus something that has been occurring under the cover of fog for decades. Proponents of free markets can only hope that the GM takeover will be a widely-publicized case study in government incompetence to further catalyze the liberty movement. Perhaps what we need is a true resurrection of the Boston Tea Party—the first Obamabiles off the line should be commandeered and driven into the Detroit River to their symbolic, water grave.

15 Responses to “The Government Motors of the Economy”

  1. CK Rock
    June 3, 2009 at 8:29 am #

    Just out of curiosity, what would the other option be? Letting the company completely fail? In your opinion, why isn’t the Administration pursuing this as a viable option?

  2. David
    June 3, 2009 at 8:48 am #

    “Why isn’t the Administration pursuing this as a viable option?”

    Unions (specifically the UAW).

  3. Steve
    June 3, 2009 at 10:42 am #

    Recently, the St. Petersburg Times Newspaper’s Business Section asked readers for ideas on “How Would You Fix the Economy?” One reader sent in the following…

    Dear Mr. President,

    Patriotic retirement:
    There are about 40 million people over 50 in the work force – Pay them $1 million apiece severance with the following stipulations:

    1. They retire immediately. Forty million job openings – Unemployment fixed.
    2. They buy NEW American cars. Forty million cars ordered – Auto Industry fixed.
    3. They either buy a house or pay off their mortgage – Housing Crisis fixed.
    It can’t get any easier than that!

    P.S. If more money is needed, have all members in Congress and their employees pay their taxes

    This is meant as humor, but still you have to wonder if it might not be a better (and cheaper) plan than the Obamination Motors plan…

  4. Reach Upward
    June 3, 2009 at 4:59 pm #

    There was never any danger that the company would completely fail. It still would have restructured via bankruptcy, but that restructuring would look different than the current model. Dealers would still be shut down. Some units like SAAB and Saturn would be spun off. Private investment — instead of taxpayer money — would be raised. And union contracts would have gone away, something that will now not happen.

    I’m still trying to figure out what the inherent value is to having an auto company whose top executives live in the US as opposed to a car company whose top executives live outside the US, but that still manufactures its vehicles in the US. So far, those companies haven’t needed bailouts, despite their market losses. Nobody is whining around about jobs lost at those US plants.

    Ah yes, it’s political payoff time for favored groups that make lots of campaign donations and do a lot of lobbying.

  5. Steve
    June 3, 2009 at 9:45 pm #

    How do you say Hummer in Chinese?

    Can wait to read the owners manual for that one…

    When Coca-Cola decided to enter the Chinese market, they had Coca-Cola rendered in Chinese characters. Regrettably, it came out as “bite the wax tadpole” or “female horse stuffed with wax”, depending on the dialect of Chinese used.

  6. David
    June 4, 2009 at 6:41 am #


    I agree that I am unable to figure out what extra value there is to having an auto company whose top executives live in the U.S. over a company that makes cars in the U.S. but is run by foreign executives outside the U.S. Besides that, we still have Ford as a domestic car company that is not taking government bailout money – apparently it can be done.

  7. Kelly W.
    June 4, 2009 at 9:31 am #

    I am reminded of the quote that has been attributed to Mussolini:

    “Fascism should more properly be called corporatism because it is the merger of state and corporate power.” — Benito Mussolini

    I am also reminded of the origins of the VW Beetle. Hitler made it possible to give the masses a car they could afford and the Nazi Party would be the benevolent provider of this Power to the People Car.

    With Government Motors, we see even more evidence of Fascism in the USA.

  8. Russ
    June 4, 2009 at 9:49 am #

    I think the guy is “on leave” from law school.

  9. Kelly W.
    June 5, 2009 at 8:55 am #

    I just read a short article called “Making Sense of a U.S. Owned General Motors” and thought some of you might want to read it also.


  10. Christian H
    June 5, 2009 at 10:30 am #

    To Steve on June 3rd, 2009
     Yeah, it does sound better than the current plan but that isn’t saying much.  I looked at this a bit closer, just for fun and found a few problems.  First, there are actually about 70 million people over 50 in the civilian noninstitutional labor force.
       If we were to give each of them $1 million dollars that would come out to $70 trillion dollars (about 5 times the US GDP or 6.2 times the current national debt).  To put this in context, the government has spent about 1.6 trillion on the bailout so far and has committed about 9 trillion in the form of loans, insurance, lending, and other investments.  
      The main problem with this proposal is the assumption that the government is going to spend a certain amount of money so we might as well spend it in a way that helps people.  The problem is that the government can’t give any money without taking it from someone else so to “give” $1 million to each person over 50 would, or even $1 to each person over 50 would mean that the us taxpayers have to come up with that money.
    Footnotes/references for my facts available on request

  11. Blake
    June 8, 2009 at 3:12 pm #

    Yup, Government Motors is the new, albeit much larger, Amtrak.

  12. Connor
    June 8, 2009 at 9:27 pm #

    A like-minded portion of Rep. Paul’s commentary on this matter:

    The promise that this is temporary and will eventually be profitable is supposed to ease the American people into accepting this arrangement, but it is of little comfort to those who remember similar promises when the American taxpayers bought Amtrak. After three years, government was supposed to be out of the passenger rail business. 40 years and billions of dollars later, the government is still operating Amtrak at a loss, despite the fact that they have created a monopoly by making it illegal to compete with Amtrak. Imagine what they can now do to what is left of the great American auto industry!

  13. loquaciousmomma
    June 9, 2009 at 3:43 pm #

    I assume what Rep. Paul means by “what is left of the great American auto industry” is Ford. As that is all that is left of the “big three”. I am concerned that the government will find some way to force it into their clutches. I am so pleased that they have chosen to work through this on their own. It is a ray of hope to me, in this very messy scenario. But, like the similar plight of small and wisely run banks, governmental pressure may very well soon force them to their knees in submission. (FDIC astronomical fee increases for smaller banks is a perfect example.)

  14. Josh Williams
    June 9, 2009 at 7:42 pm #

    The Amtrak example is a great one.

    It boggles my mind how flying in a complex aircraft that costs millions to buy and maintain, is somehow price competitive with a train car that, ideally should cost a fraction of that. Even busses are more mechanically complex than trains. You know, the rail freight business is doing just fine these days. (I don’t know, there may be some “opportunity cost” issues with carrying passengers as opposed to cargo.)

    Of course, train companies have a long history of collusion with the government, as does the american car industry, and the banking industry. Detroit has benefited from friendly legislation and bureaucracy almost from the start, this is only the latest icing on the cake. I wish I could say different, but turning parasite seems to be a successful business model.

    I can say with a bit of confidence that all GM and Chrysler’s problems, basically boil down to incompetent management. Bad management isn’t a problem that will ever fix itself. Giving these people more money is like giving more blood supply to a tumor.

    Also, who’s to say that there won’t be new American car companies that spring up to fill the clearing left by GM and Chrysler? There are plenty waiting in the wings….for example, one of my favorites, Tesla Motors.

  15. Josh Williams
    June 9, 2009 at 8:14 pm #

    I happen to work in the welding industry. Basically, if there is way to make lots of faulty welds, Chrysler has done it. (this IS a management problem.) The front ends of Dodge Neons were/are notorious for this.

    If you own a car made by Chrysler or even GM, (Or Kia, don’t buy Kias,) you have good cause to doubt the soundness of it’s welds. This is one of the reasons why imports tend, on the whole, to have better crash safety ratings.

    I could rant on and on about the backward state of American cars.

    Technologically, cars have improved very little since the 1940’s.

    OK I’m done for tonight.

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