Government Motors: Only the Beginning

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The news that
Chrysler is going to file
for a Chapter 11 bankruptcy
is a small dose of reality in a
cycle of Alice-in-Wonderland reports that have been filtering from
Washington over the “restructuring” of the American automobile
industry. Unfortunately, even a real-live bankruptcy is going to
be so politicized that the outcome will be pretty much what the
Obama administration has been demanding all along: a government-union
partnership of domestic automobile companies.

This really
is the beginning of what we are going to see across the country,
and the government’s “new” relationship with GM (now to
be “Government Motors” or “Gettlefinger
Motors
,” after the head of the United Auto Workers) is
a beginning, not an end. And it certainly is not a solution to the
real economic crisis that is upon us.

It is difficult
to know where to begin in this ongoing sorry saga, but I will start
with the current arrangements that the Obama administration is seeking.
In its “New Deal” with GM (which actually managed to be
profitable during the Great Depression, ironically), the government
will seek a 50 percent ownership, the United Autoworkers 40 percent,
and the real owners and bondholders of the company, a mere 10 percent.
Perhaps there is some rough justice here, as the entities that are
most responsible for the company’s demise now will be the primary
residual claimants for GM’s upcoming losses.

Well, one would
hope for a “rough justice” outcome, but I suspect that
there are some other things that the government and UAW have planned
that will be upcoming to change the odds of the survival of GM and
even Chrysler, which ultimately will have the government and the
UAW as their main partners. First, we turn to the recent events
in Congress, as the U.S. Senate, once Al Franken is confirmed, will
have a Democratic supermajority, thus eliminating any checks and
balances that body once had.

The most important
outcome, as least as far as the auto industry is concerned, will
be the passage of the “Card Check” bill that organized
labor and its wholly-owned subsidiary, the Democratic Party, have
craved. This is an upcoming law that will permit labor unions to
target any business it wants and organize it once a certain number
of workers have signed cards calling for a union election.

Because labor
activists will be able to target employees all the way to their
homes and because the government will encourage lawless and thuggish
behavior (because government knows no other behavior), union organizing
of businesses will be a mere formality. Certainly, the first targets
(other than Wal-Mart) will be the many U.S. subsidiaries of foreign
automakers, which have been operating profitably in this country
for many years.

One of the
enduring myths of the present era has been the Big Lie that auto
manufacturing plants cannot be profitable without ultra-cheap labor.
When one sees the well-paid autoworkers that are with Nissan in
Smyrna, Tennessee, or the Honda workers in Marysville, Ohio, it
is apparent that employees at these places are doing just fine.
However, the UAW has a wonderful plan for their lives, as the union
has coveted these places for years, but could not organize them.

That no longer
will be the case. With the government behind its organizing attempts,
we can expect to see these foreign auto plants organized with demands
made that workers there receive the same employee pay packages that
have driven the domestic auto companies into outright insolvency.
Thus, in one fell swoop, the competitive advantage these firms once
had will be gone.

Such action
won’t solve anything, but it will effectively nationalize the entire
auto industry, foreign and domestic. Even if the foreign companies
close some or even all of their U.S. plants and try to sell more
cars by exporting them here from other countries, Congress will
respond by jacking up tariffs on imported vehicles.

Furthermore,
Congress and the administration will impose its “Green Agenda”
for automobiles, and little things like reality will not be permitted
to get in the way. Consumers will have choices taken away from them,
and if they don’t like it, well, they can walk or ride bikes.

As Ludwig von
Mises pointed out many years ago, capitalism is a system of economic
and social organization in which consumers, through their choices,
direct the scope and methods of production. Perhaps it is ironic
that the political philosophy of most official “consumer advocates”
is socialism or strong interventionism, as socialism is based not
upon what consumers might want, but rather what government and “workers”
decide is “best” for them.

For many years,
consumers have had some semblance of choice when it comes to purchasing
automobiles, and they have spoken loudly in the cases of GM and
Chrysler. In fact, they spoke volumes about Chrysler three decades
ago, but the government intervened and bailed out a company that
unsuccessfully tried to foist junk on consumers and was facing the
cold water of financial discipline.

Consumers are
speaking again, but instead of just bailing out Chrysler (again),
the government now has decided that an all-out assault on the entire
auto industry and consumer choice is in our future. This time, however,
the government and its UAW partner will not give consumers those
opportunities to deviate from their government-chosen paths that
they once had.

This
is, as Lawrence
Reed has described
, an attempt to impose “economics by
coercion.” It is the substitution of brute force for consumer
choice, but it will be hailed as a “consumer triumph”
by all of the “consumer advocates” from Ralph Nader to
the Consumers Union, not to mention the Usual Suspects of Government
Propaganda from Rachael Maddow and Keith Olberman to a government-supported
New York Times.

There is no
good way to describe what we are seeing except to say that it only
is the beginning of the “restructuring” of the American
economy. Now, it is foolish for anyone to believe that Barack Obama
or any of his Ivy-League-educated advisors and central bankers can
do anything but impose disaster upon us, but the Greek Chorus that
is the American media and the “educational system” will
do its best to convince us otherwise.

While we are
driving expensive and dangerously-cramped automobiles, experiencing
bad medical care, eating bad food, or being browbeaten by government
agents to change our attitudes about religion, economic theory,
or anything else the government targets, the Greek Chorus will tell
us that “we never had it so good.” We may be 25 years
past 1984, but in the end, it seems that “Big Brother”
really is going to be triumphant after all.

May
1, 2009

William
L. Anderson, Ph.D. [send him
mail
], teaches economics at Frostburg State University in Maryland,
and is an adjunct scholar of the Ludwig
von Mises Institute
. He also is a consultant
with American Economic Services.

William
Anderson Archives

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