The following letters are in response to questions we posed regarding the government bailout of General Motors. As GM emerges from bankruptcy, the U.S. government now owns a 61% stake in the company. For the government to break even, it is estimated that the company must be worth $68 billion.
GM and GUM
Remember the gigantic store in Moscow called GUM? It featured huge lines around the block, government-approved products for the masses on the lower levels, and a selection of quality goods on the top level accessible only to the government apparatchiks? Remember the Trabant? It was the East German “people's car” whose design went unchanged for 30 years, with two-to-five-year backlogs? With Pelosi and the UAW running things, this is where we're headed.
Questions beg more questions
I may be a cynic, or just calloused, but have we, the taxpayers, ever gotten our money back from such a program? Is there reason to believe that government will deviate from its abysmal track record of management? If the government imposes a condition of profitability as an exit strategy, we may be looking at Amtrak all over again. Does joint ownership by the UAW and U.S. government really sound like a path to viability? Or the perfect vehicle to milk the taxpayers and loot what remains of what once was the pride of American manufacturing?
My personal take on the bailout is that it comes down to the partial nationalization of some pretty significant sectors of private industry and the complete nationalization of others. So much for laissez-faire economics. The biggest disappointment is that corporate America used to tighten their belts and roll up their sleeves, but now they just stick their hands out.
San Diego, Calif.
No more easy money
It's not all doom and gloom for the auto companies, as reorganization will allow GM to get labor costs to ratchet downward. In an economy where we import so many hard goods, it's inevitable that we need to better align our manufacturing wages with the world economy. Inflated wages or costs will not be tolerated, as there is just too much competition worldwide. We can look forward to lower or stagnant manufacturing wages in the years to come as worldwide labor costs align. Easy money is a thing of the past, trade unions have less leverage to inflate costs, and people will have to take care of themselves and their future a little more.
Perhaps more job losses are needed in order for people to make the connection and realize that what one buys directly supports or weakens the jobs of neighbors. A lot of the goods we buy do not need to be cheaper, imported stuff. As these goods are durable and depreciate long term, cost is not a huge factor, although it may seem that way. We have fallen into a throwaway mode and an accelerated consuming habit, which requires cheap goods to justify or sustain. Price is king for that model, and that's why we buy inferior imported products, which feeds the problem of not buying products made by our neighbors. In contrast, buying moderately priced, high-quality U.S.-made products is a good counter to globalization and will help maintain a reasonable trade balance.
I believe that this is the only sustainable financial model. We will end up there whether we like it or not, if we want to eat or have any chance at living the American dream. We need modest savings, modest growth, value-adding incomes, and an economy where value is grown rather than extracted, as it has been for the last 30 or more years.
Wanted: Your opinions
Do you have an opinion to share on the recession or the economic stimulus plan? How are you getting along in these challenging times? We'd like to hear from you. Write us with your thoughts and we'll share them in a future issue. Contact us at email@example.com.