Governments running business

What can we make of the takeover of General Motors by your government?

First, it was probably necessary.† Remember GM has been failing for years.† It was ball and chained by wage and benefit contracts.† These made it impossible for GM to compete with non-union foreign automakers.

More important to remember is that GM finally fell on its face while our economic storm raged.† When it threatened to bring the house down.† Government long felt the company would go bankrupt.† But that moment, in the throes of the storm, was not the moment to let this occur.† Fair enough.

So government bailed it out with loans.† It has converted the loans to stock.† Which means that you, fellow taxpayer, own most of the stock of this company..† And you will watch more of your tax dollars soon go into it.

The plan calls for General Motors to get back on its feet, of course.† At some point the government will sell its stock to private investors.† The plan is for the politicians and bureaucrats to keep their hands off the company.† Right.

Here is a more likely scenario.† The UAW, which was given an oversize piece of the pie, will pressure politicians to change the company to favor the union.† The politicians will do the unionís bidding. They already have, in the bankruptcy arrangement.† They broke the law and a hundred years of precedent to favor the union.

Too, the politicians will pressure GM to build more green cars.† They already have.

Politicians adore power.† That is what politics is Ė acquiring and using power. Using the power over GM they now have, they will make political decisions about a commercial venture.† Not healthy for the commercial venture.† On the matter of green cars, for instance, car buyers donít want Ďem.† Not in numbers that allow car companies to make much profit on them.

I can imagine how the politicians may react to low sales of green vehicles.† They will further mandate high-mpg models.† They may slap more taxes on gasoline, to try to force drivers to buy these models.† They may attempt any number of political moves to create an artificial market for the cars their green supporters want us to drive.

If you need an example of this sort of thinking, think Amtrak.† It routes trains that can never make money.† Because politicians insist that Amtrak provide service to their parts of the country.

Such machinations make it more difficult for GM to grow really healthy.† They make it more unlikely the company will grow so profitable that private investors will queue up to buy governmentís shares.

Another reason private investors may keep their powder dry is that government gave them the back of its hand in this bankruptcy.† The President derided them, held them up for rebuke.† His negotiators strong-armed them and simply stole their money.†

Legally they were entitled to a much larger share of the new GM than they got.† Government trampled on that law.† That law was supposed to protect private capital.† Investors take risks knowing they have some protection from the laws of the land.† When that law is ignored by the government, what is the message to private investors?

In this bankruptcy our president behaved toward private capital like Vladimir Putin and Hugo Chavez have.

Life is a collection of ifs.† If the new GM manages to keep the politicians out of its hair, its chances of success will improve.† If the new GM manages to get government out of its pocket for good, its prospects will improve.† Those are important and huge ifs.†

Truth is, governments do not run businesses well.† I hope the President means what he says when he pledges that government wants to get GM healthy again and get out.† The sooner it sells its stake the better.

From Tom ... as in Morgan.††††††††††††††††††

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