The Auto Bailout
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Posted: 11/10/08
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The Auto Bailout
By Thomas E. Brewton
Classic socialism in action.
Socialism is characterized by ignoring the free marketplace and
empowering intellectual planners to control the economy with a cocoon
of regulations and directives. In Europe (and today in China)
economically moribund companies are designated national champions and
kept alive at taxpayer expense, even when they can't compete in the
free market without government subsidies.
This flows from socialist governments' belief that full employment
can be maintained only by massive deficit spending. J. M. Keynes,
the economics guru of the the New Deal era, opined that it would be
suitable government policy to hire men to dig holes one day, fill
them up the next day, then re-dig them and refill them ad infinitum.
In contrast in a free marketplace economy, consumers, not government
planners, are the final arbiters of which products and which
companies survive and prosper. Despite the endlessly repeated
liberal-progressive-socialist dogma, no corporation is able to trick
consumers, let alone to force them, to buy its products by use of
advertising.
If that were possible, GM, Ford, and Chrysler would not be in
trouble. They would simply increase their advertising budgets and
compel consumers to buy their vehicles.
The simple fact is that automakers' rearguard efforts to offset labor-
union-inflated production costs have been unsuccessful. Their
production economies, coupled with the anti-company antagonism and
shoddy workmanship, even deliberate sabotage, by their unionized
workers, have resulted in over-priced products of inferior quality.
Consumers have recognized this and turned their preferences to the
products of foreign manufacturers manufactured in the United States
by non-unionized, reasonably priced labor.
Bailing Detroit automakers out of their financial dilemma, as well
as Federal support of unions' monopolistic extortions, thus are
classic socialistic management of the economy. A bailout will not
cure the problem. It will only exacerbate matters and make ultimate
resolution more expensive and disastrous for all concerned.
Everyone has to regret the distress that will befall the thousands of
workers and suppliers in the auto industry and related companies if
the Big Three go under financially. Remember, however, the root
cause of this distress is President Franklin Roosevelt's New Deal
Wagner Act that enabled communistic and socialistic unions to
hamstring the auto industry.
Note also that the incoming Obama administration has signaled its
support for measures that will tighten the unions' python grip on
American industry. Labor unions expect a payoff for their having
massively supported, as usual, the Democrat/Socialist Party with
campaign contributions and get-out-the-vote free labor.
Then, as Lenin famously asked, what is to be done? The solution is
this case, however, is not a radical turn to socialism.
However painful, the cleanest and most effective approach is to allow
the Big three to file for bankruptcy. That might open the road to
washing out all the crippling union contracts, creating new and
economically viable corporations that could re-employ many of their
former employees at competitive labor rates.
Stockholders, of course, would likely lose their investment in the
bankruptcy workout. But that too is the nature of a free-market
economy. Investors take a risk in expectation of a profit. They
can't always be successful, particularly when impending doom has been
on the horizon as long as has the Big Three situation.
Were the bankruptcy courts to approve such a settlement, the
restructured, slimmed-down corporations emerging from bankruptcy
would have a far better chance to survive against foreign
competition. And their domestic suppliers would be in a sounder
position, no longer squeezed by wafer-thin, cram-down prices and
attenuated payment schedules.
Thomas E. Brewton is a staff writer for the New Media Alliance, Inc.
The New Media Alliance is a non-profit (501c3) national coalition of
writers, journalists and grass-roots media outlets.
His weblog is THE VIEW FROM 1776
http://www.thomasbrewton.com/
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