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.