Goddamn it. I didn't want this to be an economics blog. I wanted it to be a political blog. What? What's that you say? I should write about Barack Obama, then? I don't think that I can really say more about Barack Obama than has been said. Besides, if I don't tell him how to fix the economy, who will? Okay. Fine. Barack Obama in 20 words or less:
First Black President. Fairly boring but intelligent. Better than the white-haired flip-flopper. He needs to grow a handlebar mustache.
Bang! Right on at twenty words. What? "flip-flopper" counts as two words? Fuck you! It's hy-phen-a-ted.
Alright as I said, it is up to me to save the world from economic ruin, so let me get to it. I'll start with:
THE US AUTOMAKERS
The big three automakers have been ensconced in the elite position as principal suppliers of cars to the American people since the early 20th century. However, their privileged market position has been declining since the 1970s. Why you ask? Well, there have been several reasons:
- They have been burdenered by unfavorable and inflexible contracts with their principal union the UAW (who is probably the biggest villain here)
- They have had inferiour quality control to their rivals (especially the Japanese)
- They have been burdened by too large and extensive a network of dealers (who are not directly under their control)
- They have focused on large luxury vehicle manufacturing and marketing--these vehicles are unrealistic during periods of higher gasoline prices
And last but not least, they have been hurt by the credit crisis. Bullshit. Okay. It's true. They have been hurt by the crisis, but BULLSHIT!!! Most businesses have been hurt by the credit crisis. Circuit City declared Chapter 11 recently. But Best Buy, Fry's, and Newegg didn't. Economics is Darwinism (at least in a capitalist economy). Hard economic time culled the old, sick, and weak sheep from the herd. And Chrysler, GM, and Ford have a bad case of bronchitis. It's possible that they might recover under better conditions, but when food is scarce, they won't make it.
But that doesn't mean that they shouldn't be helped. It isn't the federal government's job to preserve capitalism in its purest most idealistic sense just like it isn't the federal government's job to preserve democracy in its purest most idealistic sense. It is the federal government's job to do what is in the best interest of the majority of people while preserving a high degree of fairness for all.
So this brings up the question: What action can the federal government take that would most benefit the American people(Fuck the automakers; they don't get to vote)?
If the federal government gave money to the automakers, how much would they need to stay afloat long enough to recover? $25 billion might no be enough. Even if they managed to survive on $25 million, they would no doubt need to shrink and who's to say they wouldn't keep making the same mistakes that they have in the past? They would still be burdened by horrible contracts with labor and car dealers (some of which have been codified into state law--believe it or not).
If the automakers disappeared, all manor of havoc would break loose. $3 million jobs would disappear over night and we might as well all go begging on the streets of Beijing. But bankruptcy doesn't mean that the automakers would disappear. It would mean that contracts that they have with the union, suppliers, dealers, and creditors would be renegotiated before a federal bankruptcy judge. That could be perfect. Right? It's all of those legacy contracts that are weighing down GM, Ford, and Chrysler. But the psychological impact that a bankruptcy would have might damage the economy by itself--not to mention any interruption in business that would go with that.
So what else is there to do. Well:
- The federal government should start mediating renegotiation of the unsavory automakers contracts immediately.
- The government should start seeking a buyer for Ford, GM, and Chrysler.
First off: the contracts. They have to be renegotiated eventually. Either voluntarily or under the auspices of a bankruptcy judge. Why not start now?
As to the sale: Those companies are clearly managed very poorly. Toyota or Honda would do much better. If they aren't interested, Tata, Hyundai, or Shanghai Automotive Industry Corporation might be interested. These companies would require some serious government incentives to even think about buying one of the Toxic Three, but the taxpayer would likely get bigger bang for their buck handing it over to these guys. But wouldn't these guys just relocate the US auto industry overseas? Maybe. But that's been happening for decades. Besides, if the burdensome contracts are renegotiated, they might not move operations overseas. Honda and Nissan have manufacturing plants in the U.S. (It would help even more if the government could lift the health care burden from the car companies ... but that's another blog entry.)
So there you have it. It ain't perfect, but it's the best you'll do under the circumstances. Now get the fuck out of here. I have to go to bed.