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FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Obama's Auto Industry Bailout as an Implementation of Fascism

Politics / Credit Crisis Bailouts Apr 06, 2009 - 10:23 PM GMT

By: LewRockwell

Politics Best Financial Markets Analysis ArticleVin Suprynowicz writes: The typical American automobile in the early 1920s was easy to describe. It was boxy and black, offered a manual transmission only, and sported a straight-up four-cylinder engine. Creature comforts were few. On the bright side, if your car tipped over on a sharp turn – as the top-heavy contraptions were wont to do – two strong men could usually set the thing upright, little the worse for wear.

On the front were four letters: “Ford.”

A decade later, despite hard economic times, America's streets teemed with cars in every color of the rainbow. They were far more streamlined. Six and even eight-cylinder engines in more efficient and powerful configurations succeeded one another rapidly. Manufacturers vied with one another to advertise new and better features both mechanical and aesthetic.

What had happened? History has two names for what had happened, both of which (at one time) meant the same thing:

  1. Free-market competition.
  2. Chevrolet.

Henry Ford had famously said Americans could have any color car they wanted, as long as it was black. What it took to change his mind were competitors with better ideas. Innovative, vibrant American auto manufacturing raced to a world leadership position which was not seriously threatened for half a century.

So why has American free-market auto manufacturing failed, today?

It's not at all clear it has. Auto manufacturing in America has been subject to an ever-tightening noose of government regulation over the past 30 years, the most onerous being “fleet fuel efficiency standards” which require U.S. manufacturers to make a certain percentage of light, less safe, high-gas-mileage vehicles to which buyers give the cold shoulder (and which can't be sold for enough to cover inflated union “legacy” labor costs, anyway).

The industry tried to hang on by making up profits solely on the bigger, heavier vehicles that U.S. consumers love and our masters in Washington love to hate. To sell more, they offered easier and easier credit. That created a bubble.

Free-market capitalism has developed a systematic way to organize and minimize the pain of contracting bubbles. Two of America's Big Three automakers probably need to shed their costly union contracts by going through a bankruptcy – a real one, not a “directed bankruptcy” with union contract declared off limits from the start.

Such a course would still leave them in the hands of free-market entrepreneurs (albeit new ones), making decisions in which they know their own capital is at risk.

But the Obama administration, deeply beholden to the unions, wants no part of that orderly economic solution. Instead, as became obvious this weekend, the U.S. government, through its “bail-outs,” has de facto taken over the auto industry.

President Obama over the weekend forced out long-time General Motors CEO Rick Wagoner (yes, as in “Chevrolet”); gave Chrysler just 30 days to merge with Fiat or some other foreign entity; declared he will accept no dawdling on his demand that Detroit must “build the next generation of clean cars,” and announced creation of a new “Director of Recovery for Auto Communities and Workers” – a post to be filled by former Deputy Secretary of Labor Edward Montgomery.

It should take the breath away. An elected politician who never even finished a term in the Senate, who has never so much as run a local car dealership or worked the counter in a brake and muffler shop, has just removed the head of a major American corporation – the kind that's supposedly owned and controlled by private stockholders.

Have Mr. Obama and “Ed” Montgomery invested $10,000, $50,000, $100,000 of their own cash in auto stocks – money they stand to lose if their scheme for “cleaner cars” goes down as the next Edsel?

No. Not a penny. They want to play with the toy trains, but if they break them, they'll just “move on.”

Then, in a move that sounds like something out of Ayn Rand's great parody of the new Deal, “Atlas Shrugged,” the President declares he will decide which firms will merge and which will survive, and winds up the day by appointing a desperately pro-union bureaucrat and functionary to “fix things” in autoland – clearly implying what's needed is not freedom from regulatory and government-facilitated union-contract shackles so automakers can go find out what consumers want to buy, but instead some kind of institutionalized hand-holding and lifetime welfare (“using the unprecedented levels of funding available in our Recovery Act,” the president said) for their poor, abused workers – many of whom retire in their 50s and enjoy handsome pensions and benefits for the rest of their lives, with the bill added to the price of every Detroit-made car.

It appears the president and his men have entirely lost track of – if they ever really grasped – the fact that in America, major industries are not run by the government, and for good reason.

This “new” system – in which private capitalists technically maintain title to their enterprises, but really operate under close, monopoly government supervision – was tried in Italy starting in the 1920s (where Mussolini's system was called “Fascism”), and in Germany starting in the 1930s (where they called the plan “National Socialism.”)

This is not “name-calling.” These terms describe a certain type of state-run economic system, to which the Obama administration – in office a mere 60 days – is now embarked with a vengeance on converting this nation.

It's a version of central planning, and it can't work. No one bureaucrat can know what everything should cost, which technological innovations will succeed, and what consumers will buy.

In fact, the president's weekend speech on this subject is even more breathtaking than that, if examined closely.

Those “unprecedented levels of funding available in our Recovery Act and throughout our government”? They'll be used to “create new manufacturing jobs and new businesses where they're needed most – in your communities,” the president said.

Note that he did not set a goal of “bringing back” lost or threatened auto manufacturing jobs. No, apparently he's quite content to have the lion's share of Americans' autos manufactured from here on by the Japanese, the Chinese, the Koreans – even the Italians.

Instead, the former “community organizer” sees the problem as one of “communities,” vowing that his gang of ex-Labor Department union activists – who have never created a free-market job in their lives – will “create new manufacturing jobs.”

Manufacturing what? Windmills?

In Michael Moore's amusing 1989 documentary about the beginning of the end in Detroit, Roger & Me , he interviews well-meaning people who propose the new industries to replace auto manufacturing in Michigan should include raising rabbits for food, and manufacturing lint brushes.

Have those people now found jobs in the Obama administration?

Vin Suprynowicz [ send him mail ] is assistant editorial page editor of the daily Las Vegas Review-Journal and author of The Black Arrow . Visit his blog .

Copyright © 2009 Vin Suprynowicz

© 2009 Copyright - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Kevin Trosian
23 Apr 09, 13:09
Bailout Issues

Why are the car companies getting bailed out, when their industry relies on low interest rates, for auto leases, and treating cars as disposable, as consumers recycle them every 3-5 years?

Kevin Trosian,

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