In response to my post about the misdirected-at-best union strategies in regards to auto industry woes in Ontario, SilverMoonWolf writes:
I may not be as informed as you, but I can draw opinion on what I do know about this and the whole “bailout” buzz word now.
When a horse breaks its leg, you don’t coddle it and tend to its weakness as it will NEVER get better. You shoot it so something better can take its place.
The problem is that General Motors is not a horse. You can get a new horse quite easily at the horse store, because there are lots of horses. General Motors, on the other hand, is the ninth-largest corporation in the world. It employs a quarter of a million people in the United States directly and god knows how many indirectly. If GM went out of business tomorrow, the other auto companies can’t pick up the slack because they’re hurting too.1 This is to say nothing of the fact that GM’s primary income stream is not in fact selling their cars, but the car loans they arrange so that people can buy their cars – want to see what happens when a giant creditor goes bankrupt?2
Shooting GM in the head simply isn’t an option: it’s too big and its loss would do too much damage. I’ve seen economists suggest that the loss of GM alone could swing the current American recession into a full-blown depression. You can say “well, we shouldn’t have companies that are too big to fail,” and that’s a valid point of view, but that doesn’t make the economic-violence plan an equally valid answer in response to the current crisis because you can’t do, say, a Ma Bell-style corporate megasplit if said corporation is suddenly nonexistent.
Moreover, shooting GM in the head isn’t even a good comparative idea, because unlike the horse, there’s no reason GM can’t be saved. Its decline was the result of accounting culture taking over the management of the company from the engineering culture that ran it up until the mid-70s (which is also the reason most of their cars are comparatively shitty nowadays). Affecting the management style and roster of GM is something the federal government can do with a bailout. After all, a bailout is, in its purest essence, a loan – and any loan officer worth their salt can require reasonable preconditions for that loan.3
Finally, it’s worth noting that the scandal of the Wall Street buyouts from a rational perspective isn’t that investment firms went buck-wild, because the government let them go buck-wild and voters in turn didn’t bother paying attention and let the government let the firms go buck-wild. The Wall Street meltdown is the result of negligence in all quarters, pure and simple, and nobody has any excuse because really smart people with economics degrees were saying “hey, guys, this is going to end up fucking us in the ass” years ago and nobody paid attention.
No, the scandal of the Wall Street buyouts has been the response from all concerned, from Henry Paulsen initially offering what amounted to a blank cheque to Wall Street firms refusing to trim fat as they got their paydays to the public’s offended face that these investment firms weren’t fiscally responsible when nobody was paying attention (and remember, the average member of the American public has a negative savings rate nowadays, so who the hell are they to complain about others’ fiscal negligence)? It’s the combination of offended self-importance and sheer ignorance of the problems at hand exhibited by just about everybody, be they in charge or not, that irritates me. It’s one of the reasons that Kel Mitchell’s “FIX IT!” analyst character on Saturday Night Live is so painfully unfunny – it’s too on target.4
- The Japanese companies are hurting less because they planned for this in the long run, but there are limits to one’s ability to plan. [↩]
- Hint: you really, really don’t. [↩]
- Also note that the history of government bailouts of the private sector, at least in the United States, is one of eventual government profit as the loans are eventually paid off. [↩]
- The other reasons, of course, being that Kel Mitchell is not good, and the writers writing the character are not good. [↩]
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16 users responded in this post
Well said. I have been driving a Saturn SC2 (the three door model) since ’01 and really it has been a pretty reliable ride and has pretty sweet gas mileage. I don’t know if Saturns are on average better quality compared to other GM brands or I just got lucky. 🙂
My question regarding GM is: Can they be “saved” at all in this economy?
They make a product that few people want or will buy right now, because, as noted, their quality is crap and there are better brands out there if one MUST buy a car. I don’t know much about how long it takes to re-tool a factory, but even if GM could crank out “smart cars” or hybrids tomorrow, would the market even be there to purchase them?
I almost wonder of a “Magrathea” type solution is needed: Mothball the infrastrucutre until the economy can afford their services again.
Analogy supporting full on headshot because of the way we treat a working animal fails.
News at 11.
Turns out there’s a limit to how much you can shaft your children with overwhelming debt. Who knew?
Uh, I don’t think they shoot horses anymore. There’s this thing called “surgery” where they can do this thing called “repair” this stuff called “damage” – it’s all very last century!
Kel Mitchell’s range isn’t great, but goddammit if I don’t laugh every time at the French Def Jam comic. Zut alors!
Q: What is the next step up from a company that’s “too big to fail”?
A: One that’s too big to save.
Just a random note…
According to NPR News (as of an hour or so ago), approximately 1 in 10 jobs in America reside in the Automotive industry. So yeah, I can see where letting GM fail would be bad.
The real problem with this and all other assets of the economic crisis ultimately lies in a total lack of education. If my fellow countrymen were a tad less lazy, and more inclined to educate themselves about silly little things like “mortgages” a tremendous amount of this crap could have been avoided.
“bmaryott said on November 12th, 2008 at 1:08 pm
Uh, I don’t think they shoot horses anymore. There’s this thing called “surgery” where they can do this thing called “repair” this stuff called “damage” – it’s all very last century!”
Except that a broken leg is INCREDIBLY difficult to repair on a horse, and very painful even if it can be done, so most horses are still put down if they have a broken leg. I think they use injections rather than shotguns nowadays, but you still end up with a dead horse.
It’s actually Kenan Thompson, not Kel Mitchell.
bmaryott: They killed the horse that came in first or second place in the Kentucky Derby or some other important horse race this year, so yeah they still kill lame horses.
I saw an estimation that if the Big Thee fail that there will be 3 million jobs that vanish. That’s just those companies and their direct support in the US, though. That doesn’t also take into account everything else that those companies hold up. It scares the hell out of me that these companies might disappear, having family in Michigan.
I really think that the solution to a lot of our economic problems resides in coming up with viable alternative energy solutions. There are a ton of jobs possible there and it would cause these companies to be more viable going forward.
“The other reasons, of course, being that Kel Mitchell is not good”
May I remind you of a little thing called Good Burger?
Thank you, MGK. I come away from this a little smarter. I’m still a little bit more…vicious in my solutions for things like this because the people at fault deserve to reap what they sow. I’m a big proponent of “KARMA. NOW.” You are right though. It’s too much of a loss. With the type of person I am, I find myself drifting more towards the cultural and “personal” aspects than the fiscal. Like why they’re failing, whose to blame and what is their attitude that causes these failings. Then I think to myself “How can those attitudes, as the root problem, be fixed?”. It saddens me to think that nowadays a substantial amount of my fellow countrymen (AHHHMURRICANS! FUK YAH! *beercan + forehead*) and MOST of the people in charge are utterly worthless and indisputably corrupt individuals that CAN’T change.
I’m getting off track.
You’re more informed than I am and I read your blog because, honestly, I feel smarter after. Also, comic geek. Thank you for explaining this out to me as you did. Now if only more people could do so. Unfortunately, they’re busy passing Prop 8, stuffing down Mickey D’s and buying houses they have no way of affording.
Also, way to miss the metaphor bmaryott.
Wait, Kel Mitchell is on SNL?
And apparently reprising his role of Repairman?
*This is the kind of reference people are gonna get to deal with as the Nickelodeon generation comes of age.
I was wondering what all the hub-bub was about. It just didn’t make sense to me that we could spend $700 billion dollars on dividends for investors and CEO getaways, but we couldn’t save our entire auto industry.
Also, I thought it was Kenan, not Kel?
It is Kenan, not Kel. I like the fix it character, but it’s a one-shot, not something to be milked to death. But when did that ever stop SNL?