Volatility

March 30, 2009

Some thoughts on GM

Filed under: Bailouts Only Propped Up Zombies, Corporatism — Tags: , , , , — Russell Bangs @ 4:26 am

 

So, just as many of us predicted from the start, giving the auto companies ad hoc holdover money and a deadline to come up with a plan would lead to…..giving the auto companies ad hoc holdover money and a deadline to come up with a plan. Well, the difference this time is that Rick Wagoner is out, and Chrysler has to engineer a merger with Fiat. Still no word on why Cerberus doesn’t have to put up any money.
 
(From the start it’s seemed to me that if Chrysler’s owner doesn’t believe it can be saved with more cash, why should the government second guess them? Why in this case does the administration know so much better than “the market” and an iconic private equity firm, while where it comes to the banks they keep repeating, Hare Krishna-like, the chant “the government shouldn’t be running banks”?) 
 
While I have no love for General Motors and am opposed to this bailout as well, I still differentiate between an auto manufacturer which, however sociopathic its actions and products (its role in the dismantling of America’s streetcar system; the corresponding invasion strategy of highway construction; the massive social engineering project known as suburban sprawl; SUVs), still did actually produce a real product, as opposed to the big banks which were essentially running a big scam.
 
So I find it telling that Obama is willing to at least make a show of getting tough with GM and Chrysler (though not so much with GMAC and Cerberus), while desperately trying to cater to every frivolous whim of the big bankers.
 
(Though even here the focus is very clearly on what is good for GM, i.e. its bondholders, while the public are even in the picture only as “consumers” who must somehow be induced to buy American cars, that is as a sort of mine. Notice also how even though the UAW has already made significant concessions while the bondholders have made none, the administration propaganda line is that we’re at square one, and “both” are equally obligated to give up things at this point. The bondholders are holding firm, expecting to be bailed out completely. Given how Obama is determined to do exactly that for the bankers, the bondholder intransigence here seems perfectly rational.) 
 
My first reaction was that Wagoner, a relatively small fish, is being sacrificed as misdirection from what is clearly a Geithner/Obama policy priority to maintain the big bankers in their jobs.
 
Of course Wagoner provides a clear example of the rent-seeking neo-feudalist mindset. His commitment to the sprawl-SUV societal model, his refusal to pare product lines, tranform to a hybrid-based business model, the killing of the electric car – these all show how he and the board had become completely calcified in the finance elitist sense of entitlement. Wagoner believed GM had a “right” to exist in that form, and if reality was contradicting the entitlement, it was the government’s job to suppress that reality.
 
So GM’s “business model” was to lobby, fund political action groups, deny climate change, and file lawsuits to preserve its bloated, calcified structure. Beyond that Big Auto for a long time coordinated strategy with Big Oil to enforce the continued existence of the fossil fuel/personal car societal model. This is the essence of corporatism. 
 
I think a clear sign that we no longer have a democratic capitalist system but rather a corporatist one is that no one loses his job even over major screwups. Thus we have:
 
1. No one fired over 9/11.
 
2. Where it came to Katrina, Bush got rid of “Brownie” only under extreme duress. (I would bet that to this day Bush still doesn’t understand what Brown did wrong, or why he had to relinquish him. Just like he probably doesn’t understand why he couldn’t have Meirs on the Supreme Court.)
 
3. To the best of my recollection, no one was ever forced out for incompetence or war crimes in Iraq (although anyone who questioned administration policy or priorities was drummed out immediately); indeed they gave Paul Bremer a medal. This certainly wasn’t for any reality-based measure of performance. Rather it was for an ideological cadre who pushed ahead with his ideologically-defined task even in the midst of a war, even where it was directly counter to the rational fighting of that war (as when he removed the entire professional class of Iraq, pretending it was de-Baathification, when it was really to remove indigenous obstacles to predatory carpetbagging; the dissolution of the Iraqi army was just one element of this “blank slate” agenda). 
 
4. Now no one since Fannie and Freddie is to lose his job over the planned destruction of the global economy.
 
It’s clear that no one but ideologues could think it’s reasonable, moral, or desirable to retain the existing management of these banks, and that in the administration we obviously have such ideologues. That the existing bank management not be fired is a major policy principle for the administration. Otherwise there’s simply no way to explain why the management hasn’t been forced out as a condition of the bailouts.
 
Let’s assume that an administration is committed to a bailout policy; still, where they have roused such political anger, both reason and politics demand that you at least take the simple measure of getting rid of the dead weight management. This could go a long way toward defusing populist anger, which is so easily personalized.
 
That Geithner and Obama have refused to take this step, that they are gratuitously courting such a political backlash, is strong evidence that here, just as with Bush and Bremer in Iraq, we are not in the realm of normal reality-based politics, but in the realm of ideology trying to dominate reality.