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Looking for a Silver Lining in Government-Owned GM

Not too many people are dancing over the news of GM’s bankruptcy, but opinions are decidedly mixed on what the government ownership of the car company will mean.

Lee Cary, of American Thinker sees the era of Government Motors dawning with coercive attempts to force a Green fleet onto American consumers. This, in Cary’s opinion, will be quickly followed by the unintended consequences, namely a falling market share followed by more government infusions of money, followed by tariffs on foreign automobiles, followed by retaliatory tariffs on American-made goods, followed by economic disaster.

How about Robert Reich, who has routinely applauded the Obama economic agenda? Well, he’s not exactly sunny either. Reich says the government part-ownership of GM will do nothing more than slow its inevitable demise. He accuses the administration of trying to have it both ways by appeasing autoworkers (who want as much bailout as possible) and average taxpayers (who generally oppose the government’s intervention).

So the Obama administration is, in effect, paying $60bn to buy off both constituencies. It is telling the first group that jobs and communities dependent on GM will be better preserved because of the bail-out, and the second that taxpayers and creditors will be rewarded by it. But it is not telling anyone the complete truth: GM will disappear, eventually. The bail-out is designed to give the economy time to reduce the social costs of the blow.

Certainly someone must think things could turn out just fine. Oh sure. There’s Michael Moore. He sees this as a great opportunity for the government to seize American industry in the name of fighting a war against global warming and dwindling oil supplies. He wants massive mass transit, he wants it now and he wants it built in GM factories by GM workers who would, of course, be government workers in Moore’s world.

Feel free to leave your own predictions/desires in the comments. As for me, I’m going to take some more antacid in the hopes of quieting a stomach turning circles over the prospect of a government-owned car company.

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  • http://sidewaysmencken.blogspot michael reynolds

    There’s certainly a chance it will all work out. I dismiss people who make hard and fast predictions on economics generally or on business. If it was a predictive science all the economists would agree.

    If this does work it’s a nightmare for conservatives. It will mean the end of their quasi-religious belief in the wonder of the marketplace as opposed to the utter incompetence of government. It might cause people to wonder whether there are times when we can turn to government and expect intelligent action.

  • http://harrisonprice.com Harrison

    Should have happened ages ago… only way to do away with those bad union contracts. Of course, the guy in charge of GM now has no auto industry experience, is only 31, and doesn’t know much about the issue. Hey, it’s only the biggest corporation in the world, right?

    http://www.nytimes.com/2009/06/01/business/01deese.html?_r=1&ref=politics

    But that, in short, is the job description for Brian Deese, a not-quite graduate of Yale Law School who had never set foot in an automotive assembly plant until he took on his nearly unseen role in remaking the American automotive industry.

  • http://sidewaysmencken.blogspot michael reynolds

    Harrison:

    Let’s re-hire some of the experienced old hands who ran the company into a ditch in the first place.

  • Tully

    I dismiss people who make hard and fast predictions on economics generally

    Rule of thumb from my consulting days: Any financial/economic forecast exceeding 18-24 months is at least 50% subject to be completely invalidated by unforeseen external factors. IOW, your assumptions may be good as gold NOW, but the world is at least even money to make them worthless inside of two years.

    EX: GM could start pumping out lousy and expensive small cars that no one really wants, but if the government mandates that only lousy and expensive small cars may be sold, GM could prosper. But the smart money isn’t likely to take the bet.

    Much as I hate to say it, Riech’s analysis seems sound for now. He elaves out that the deal is also designed to transfer chunks of the money running through GM (including taxpayer funding) to favored constituencies in the meantime, which is to the admin a feature and not a bug. To the taxpayer, not so much.