Friday, June 5, 2009

GM - Government Motors

I was reading an article this week from Robert Reich's Blog and he had some very interesting insights about the future of manufacturing, GM, and American workers. Some of his highlight from Part III that are interesting are:

"Why would US taxpayers want to own today’s GM? Surely not because the shares promise a high return when the economy turns up. GM has been on a downward slide for years."

"Many younger Americans have never bought a GM car and would not think of doing so. Given this record, it seems doubtful that taxpayers will even be repaid our $60 billion. But getting repaid cannot be the main goal of the bail-out. Presumably, the reason is to serve some larger public purpose. But the goal is not obvious."

"It cannot be to preserve GM jobs, because the US Treasury has signaled GM must slim to get the cash. The company has only slightly more than 60,000 Americans today (83,000 around the world), and plans to shut half-a-dozen factories and sack at least 20,000 more U.S. workers this year."

"The purpose cannot be to create a new, lean, debt-free company that might one day turn a profit. That is what the private sector is supposed to achieve on its own and what a reorganization under bankruptcy would do."

"Nor is the purpose of the bail-out to create a new generation of fuel-efficient cars. Congress has already given auto makers money to do this. Besides, the Treasury has said it has no interest in being an active investor or telling the industry what cars to make."
and the kicker is:
"So the Obama administration is, in effect, paying $60 billion to buy off both constituencies. It is telling the first group that jobs and communities dependent on GM will be better preserved because of the bail-out, and the second that taxpayers and creditors will be rewarded by it. But it is not telling anyone the complete truth: GM will disappear, eventually. The bail-out is designed to give the economy time to reduce the social costs of the blow."

And that folks is what we call redistribution of wealth - the transfer of income, wealth or property from some individuals to others— thus creating a more financially equal society.

I have just started reading Democracy in America by Alexis de Tocqueville and he writes about Soft despotism which he says:

"Such circumstances might arise, if democracy's progress was accompanied by demands for a leveling of social conditions. The danger was that an obsession with equality was very compatible with increasingly centralized state-power."

"Tocqueville's vision of “soft-despotism” is thus one of arrangements that mutually corrupt citizens and the democratic state. Citizens vote for those politicians who promise to use the state to give them whatever they want. The political-class delivers, so long as citizens do whatever it says is necessary to provide for everyone's desires. The “softness” of this despotism consists of people's voluntary surrender of their liberty and their tendency to look habitually to the state for their needs."
As I am just starting to read this, writing this make me excited about it. This blog was created as a personal diary of my road to creating wealth. What is the point to create wealth when the government can seize your property(wealth) as they seem fit? I am sure to turn some reader off by getting political, but we truly need to see what all is going on. Am I crazy, thinking to the worst of every situation? Leave me a comment and let me know! You guys have a great weekend.

1 comment:

  1. Other things like imminent domain bother me just as much, and maybe even more. The idea that the government can decide that it wants your property to build something "more valuable" just wreaks of communism.