Rewarding failure at the expense of success: The Government Bailout of GM, Ford and Chrysler

Tuesday, December 9, 2008

Our government – Democrats more so than Republicans, but just barely – is challenging one of the most fundamental principles of a free-market economy, and of nature for that matter. Capitalism rewards success. Those companies which fail suffer the consequences, hanging on for as long as they can by virtue of their size and momentum, but eventually disappearing or morphing into a new form that is profitable. Our government, having lost faith in the economic system that made us great, is trying to change all that. They are going to fail, thank goodness, having spent hundreds of billions of dollars we don’t have. The economy will recover, in spite of all this flailing around. Only the people will have suffered by the postponement and perversion of the natural process of economic development.

It is a form of reverse Dawinism, isn’t it? I won’t bore you with the innumerable examples in nature which come to instantly to mind. Where would humanity be had the same god that guides our Congress and President-Elect implemented a similar program for less able competitive species back in the day when it would have made a difference?

Not only do we artificially continue these companies, even the management of these firms, which have so clearly proven their ineptitude, by doing so we rob those who have done better or well of the competitive advantage the deserve.

So obviously incompetent are these companies we chose to support, our Congress and President-Elect propose a “Car Czar” to oversee their operations. Is that the proper role of the government of a democratic capitalist state? Forget about political philosophies, wouldn’t it be more efficient to allow the market to effect the changes in the management and corporate culture of GM, Ford and Chrylser?

What irony. Remember how candidate Barack Obama argued that we can’t tolerate 8 more years of the failed economic and international policies of the Bush Administration? Why doesn’t that same logic apply to the current executive management of the Detroit Three? By analogy, instead of electing Mr. Obama, should we have paid President Bush and his Administration to stay in office until they got it right?

We can’t afford to be threatened, to be intimidated by the prospect of significant economic change. Quite to the contrary, it’s long overdue and something we need to embrace. Even if it means that one or more of these icons disappear, Americans’ demand for cars and trucks will be still be here and, in all likelihood, filled by in-country manufacturing.

Instead of propping up GM, Ford (the star performer of the three) and Chrysler, we should let the market determine their fate and focus our resources directly toward reducing the impact of economic adjustments suffered by affected families. Protecting their employers from the inevitability of failure is not a long term solution. It not only misses the point, it delays and corrupts the process of recovery.

Listen to the economy. Let it happen. Its process may be harsh, but it is infinitely more capable of resolving its own problems, all the more quickly and effectively if only our government would get out of its way.

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