Wednesday, November 12, 2008

Just say "no" to more bailouts

The so called “Big Three” of American automakers are in trouble. As such those automakers, General Motors (Chevy), especially, are pushing the Congress and the President-elect to act now to pump federal money into them to keep them afloat. It is appealing on the surface to keep those companies in business, but should it be done?

First, the United States government only has so much money it can keep pumping to failing businesses. The average American taxpayer is already leery of such bailouts, because it seems big business is finding loopholes to make sure their executives get huge golden parachutes and still have polices that benefit management more than the stockholders or the consumers overwhelmingly.

That is the cancer on American business, and no amount of money from the government can fix it.

As for the domestic auto industry, big management and big unions combined together for some rather financially stupid results. Let’s start with management. While firms like Toyota were looking an innovations to the products that they offered, firms like General Motors relied upon making money off big SUVs. When energy prices soared, their sales dipped. That is business. In a free market economy, the business who did not innovate should not be rewarded with a bailout.

Then there are the unions, primarily the United Auto Workers. The UAW simply demanded things like pensions and health care for retired workers that simply do not work in today’s global economy. Indeed, it is hard for the guy who works for another business to understand why his taxes have to go up or the debt on his children’s future has to go up to pay for people to make more money in retirement and have better health benefits than he does as he works. Just because the UAW has good lobbyists and the ear of the President-elect does not mean that its members are entitled to live off the sweat of the people who work hard everyday.

Make no mistake; the Democrats are pushing for the automotive industry bailout because of the UAW. The Democrats simply can not allow an American business to fail because a union demanded and received unrealistic terms in this global economy. The essence of the liberal political philosophy is on the line with the domestic automakers. The Democrats on Capital Hill and the President-elect simply will spend billions to make sure that the UAW is not blamed for a major American business failure.

The problem with that, of course, is it allows American business to remain weak in competitiveness. The Republicans do the same, of course, when they bailout the big management losers at companies like AIG.

I say, let the automakers fail. Then perhaps, finally, there will be a discussion of how modern American business is a failure. Modern American business worries about things like college degrees and where they are from instead of productivity. Modern American business worries more about taking care of management instead of the shareholders such management supposedly serves. American business is filled with financial magicians who cook the books for the short term and do not worry about long term business health as long as they get their bonuses.

The free market has a way of dealing with such businesses that do not perform. It lets them fail and other businesses that are more productive, sounder in their reasoning and more long term in their planning thrive. Perhaps it will be better for the long term health of the American economy if we just say “no” to more bailouts.

1 comment:

  1. A union connection? That just can't be?

    Just because foreign auto manufacturers come here, with more innovation, better awareness of the market and consumer demand, and the ability to run a profitable business ... that doesn't mean our companies should be held to the same standard.