Tuesday, December 09, 2008

Are they going to make it better or worse?

In case you missed it, there's a slight problem with the automobile industry right now: no one is buying. During fat times, the Big 3 automakers were struggling. Now that times are lean, they might be drowning. There's a lot of talk from Congress and our Compassionately Conservative President and the Head of the Fake Office of the President-Elect of the United States about doing something with taxpayer dollars to help them out.

My gut reaction is that the government will screw this up. They're going to cow-tow far too much to the UAW and the environmentalists and leave the automakers in an even worse position than before. Looking at some of the proposals I see don't make me budge much from that opinion.

I do however see one plan coming from the Head of the Fake Office of the President-Elect of the United States that I don't agree with but at least has the virtue of actually being tried. Obama backs the "structured bankruptcy" approach. The Big 3 would get nudged around by centralized government planning similar to what the Japanese went through in the 80's (article says it went back as far as the 70's). I don't like any of the plans I've seen but at least this one can point to some sort of results and some sort of "exit strategy" that has actually been reached in the past.

If you're going to back a plan, I'd advise backing the Obama plan. Yes it's fascism but it has a track record or working and it would keep the government from directly owning parts of the Big 3 if I understand it correctly. The market will always correct itself but not necessarily in the amount of time you have to remain solvent. Let's keep "the government" from being that "you" if possible.

Personally, I'm seeing a lot of auto manufacturers who are struggling but making ends meet. I see no reason to single out 3 who have poorer business plans for special treatment. It would mean a lot of lost jobs but what's the point of keeping those jobs around to build automobiles nobody needs or wants?

One last point, be aware if this bailout happens the airline industry will be next in line hat-in-hand asking for some cash to get them through tough times.

EDIT: I almost missed the barbershop comment by Pelosi:
"We call this the barbershop," said House Speaker Nancy Pelosi, a California Democrat. "Everybody's getting a haircut here, in terms of the conditions of the bill," she said, noting the likely impact on labor, bondholders, shareholders, car dealers, suppliers and executives. "The management itself has to take a big haircut on all of this."


Nancy Pelosi: The Demon Barber of Capitol Hill is the first thing that comes to mind. Wealthy execs coming in for a haircut only to get dropped down a trapdoor to their deaths, stripped of any money they may have on them and then getting baked into meat pies. Pelosi's comparison is indeed a good one.

3 comments:

Cousin Pat from Georgia said...

Remember that the Japanese Ministry for International Trade and Industry (MITI) was created post-WWII to focus Japanese business to streamline an anarchic economy. Don't forget the structure of Japanese businesses in the keiretsu model, which also had a heavy hand in these policies.

Fascism? Not quite. No plan currently resurrected from postwar Japan for America's big three has yet to mention sending the competition to the gulag or muzzling detractors under threat of violence.

The sticks and carrots in play for all of our nation's bailouts are financial. Noone will hold a gun to the head of a CEO, shareholder, or union member and force them to concede a point - the stalwarts just won't be shown the money.

Personally, I don't think a bailout is a good thing because it isn't fair to the other businesses who have their stuff together. That, and you're right about the airlines.

Sometimes businesses fail, and the managers who let it happen should be out of a job ("this company isn't making any money, but I want a bonus of TEN MILLION DOLLARS mwu hah hah!"), just like the union workers who negotiated themselves out of a pension ("this company isn't making any money, but the managers are making TEN MILLION DOLLARS, so I will demand TEN MILLION DOLLARS for the pension plan, mwu hah hah!!"). The managers at the next business learn how to effectively manage, and the union demands evolve.

This is a good thing for a real economy because it teaches consumers they can't have everything, and teaches the same lessons to management and workers.

But then again, I'm the Odd-Man who isn't trying to put food on a family's table, so I can wax policymaking with little personal repercussion.

Dante said...

"Fascism? Not quite. No plan currently resurrected from postwar Japan for America's big three has yet to mention sending the competition to the gulag or muzzling detractors under threat of violence."

I did some searching on definitions of fascism. Most other -isms' social tendencies are completely divorced from the economic policies. But for some reason every definition I've seen of fascism makes it a point to require the social tendencies as part of the definition. So I concede that you are correct. It's not quite fascism. It's the economic model of fascism minus the gulags and muzzlings. I guess fascism can't stay a bad word if you try to look purely at the economics of it.

In whatever case, the economic policies of fascism minus the overbearing social qualities seems to be labeled most often as "quasi-fascist" or "extreme right wing" (in the European sense) policy. I think that certainly applies here.

"The sticks and carrots in play for all of our nation's bailouts are financial. Noone will hold a gun to the head of a CEO, shareholder, or union member and force them to concede a point - the stalwarts just won't be shown the money."

By taking in only bankrupt companies and denying them money if they don't take the carrot, then it doesn't matter if the government is using a gun or a check. The companies in question will be compelled to apply.

Cousin Pat from Georgia said...

I don't think it is even close to quasi-fascism because the businesses can always choose to find means other than the government to fix their problems.

They may not like those other mechanisms, and those mechanisms may have a higher risk of failure than trusting a government intrusion, but those choices still exist.

On another note, I remembered this while catching a glimpse of the news this morning. Nancy Pelosi on a very bad hair day coupled with a makeup specialist could stunt double for Johnny Depp in Sweeny Todd.