Am I the only person getting a little nervous about the dynamic between American government and American business? Rick Wagoner has been asked to step down by a presidential task force. Read one of the many articles here.
There are a few things that disturb me about what is going on. First and foremost, any time the government decides to try their hand at making business decisions I get queasy. This however is not any business decision, it is a request from the government of our nation for the CEO of a publicly traded company to step down. Talk about blurring the lines. Isn't that the shareholders' job?
Not when the government uses taxpayer dollars to keep the company afloat you say. My point exactly! This is the embodiment of the slippery slope argument from my previous posts on government bailouts. The companies who sought government intervention should have been careful of what they wished for because they are definitely getting government intervention.
Amidst all the actions that rub me the wrong way are a few that are just leaving me utterly confused. Try and stay with me on this one. A company that was deemed too big to fail was being kept afloat by taxpayer dollars. The creditors and unions, seeing that the company was not going to left by the wayside, refused to make any meaningful concessions. The administration who ran a heavy pro-labor campaign is now firing the CEO and refusing additional bailout funds for the company that we originally deemed too big to fail. Upon being fired Wagoner, who was making a whopping $1 salary, became entitled to a roughly $20 million retirement package. What is going on here? Does anyone stand for anything or are we just knee-jerking each and every week. I am all about being pragmatic in our approach to government problems but this just seems indecisive to me, not to mention it shouldn't be a government problem!
Furthermore, I don't buy the too big to fail argument. I know the stats surrounding the big 3 and the amount of jobs both directly and indirectly they provide. However, I don't believe that if one of them went out of business it would be the end of the US as we know it. People need cars and that market share would shift to another car manufacturer. This is where it gets politically sticky, because the companies who are doing it best happen to be foreign manufacturers. Constituents don't like that. Consumers don't mind, but constituents do (we are all both). Ironically, most of these 'foreign' makers have plants right here in the USA.
I have no doubt that there are consequences to these companies going out of business. The period of adjustment would be difficult to say the least and a lot of workers would be displaced. But does that justify our government using the tax dollars of everyone to string along a broken company that will likely not last in the long run anyways? Which is the greater evil? I guess no one can really be sure until everything plays out. I just think that the government is always so concerned with being fair and taking care of those in need, but what about those who need to fail? Who is not to say that five new American auto makers would rise to fill the void left by a fallen GM? Creative destruction anyone? Only time and tax dollars will tell!