So there hasn't been any kind of discussion here about Obama firing a private company employee. I suppose it's predictable that it frightens me. Anyone else here have an opinion? I don't particularly care to discuss the particular merits of whether this is a help or a hurt for GM, its shareholders, car brands or long-term health. What is far more interesting is whether you think this was an okay thing for Obama to do, or whether you think it's the harbinger of the death of wealth creation by humans.
I think it's hard to overstate how bad a precedent this is to have set. GM created enormous wealth, economic stimulus, stability and productivity in its time. GM symbolized, and for good reasons, what it meant for America to emerge from WWII and the Great Depression as the world's unchallenged economic force. That symbol meant regulated free markets--not free as in unconstrained, but free as in free from governmental controls. GM, GE, Monsanto, Microsoft are all companies that proved that the government was not the best planner of prosperity. More properly perhaps, the contrast between Boeing, RSK MiG and AirBus is the proof that governments can't plan or subsidize prosperity. Markets do that.
Now we have the president firing individual CEOs. First of all, he doesn't have the time to do this, and second, he isn't smart enough (because no one is).
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Well, it doesn't appear unprecedented -- the CEOs of Fannie, Freddie, and AIG were all also fired when their companies required bailing out by the Bush Treasury department. The reporting was different here in that the media reported that Obama personally fired Waggoner, whereas the previous incidents were reported using the more vague "CEO was forced out" language without indicating the agent.
So here's the first question -- does it make it worse or better or no difference that the President personally fired the CEOs? Would it be less offensive if it came from the Sec Treas? Or is it that "the government" fired the CEOs?
The issue I have is that it seems kind of haphazard who gets fired -- Why the head of AIG and not CITI? Why the head of GM and not Chrysler? There are reasons, I am sure (for example the head of CITI has only been on the job for a year).
Ultimately, I agree with you that private enterprise should stay private -- including its personnel decisions. It raised my eyebrows when Waggoner got the boot. But when the government has essentially taken ownership of a business, understanding that it is only temporary and limited ownership, it makes sense that they should act like owners, including demanding changes to protect the public's investment.
A couple of side points:
1. I don't buy the "too busy" argument one bit. The economy has been priority number one, and saving (whether to save) the auto industry is a big component of that. I would be more concerned if he seemed detached and uninvolved.
2, The Boeing-Airbus thing is not a slam dunk. In fact, depending on how you count, a strong case can be made that Airbus has been kicking Boeing's ass for a decade and will continue to do so for the foreseeable future. Moral: government subsidies can be a huge competitive advantage?
We just hadn't really discussed it and it's worrisome to me.
1. I don't buy the "too busy" argument one bit.
It's not that he can't spare the 45-minute phone call, it's that our government is now running companies. You make the argument that now that we've bought them, we should have the right to run them. Well sure, this is why I objected to purchasing them in the first place.
Airbus wins, when it does, precisely because it doesn't compete with Boeing on anything even close to a level playing field. The argument for the Airbus model is that it rarely lays anyone off because it's so heavily subsidized by its governments. The argument for Boeing is that it has generated much, much more wealth.
Airbus wins, when it does, precisely because it doesn't compete with Boeing on anything even close to a level playing field.
Very true. They were able to sell their planes essentially for a loss in the 2000-2005 era.
The argument for the Airbus model is that it rarely lays anyone off because it's so heavily subsidized by its governments. The argument for Boeing is that it has generated much, much more wealth.
Has it? Boeing's been a break-even proposition over the long haul, barely. I think that aviation is such a cyclic industry, with such dramatic boom & busts, that there may be some benefit of governmental buffering of the business cycle. Of course, the European position in the trade disputes is that there is government subsidies of Boeing -- through its military arm, while Airbus' EADS unit is much less richly supported by the European militaries.
I guess you could call that subsidies, but I'd wager that the US Military would award contracts to Airbus if their airframes were better/cheaper.
the US Military would award contracts to Airbus if their airframes were better/cheaper
Sort of. Did you follow the Airbus-Boeing tanker battle? The procurement guys in the military generally make recommendations based on the mission requirements, but there is pretty strong "buy american" pressure, and even Airbus was forced to agree to build the planes in the US to get the contract.
But that's not quite what the Europeans mean when they talk about DoD "subsidies" for Boeing. The US buys ten fighter planes for every one Europe buys. Ditto for every piece of military hardware and satellite gear. The defense industry is so huge and so profitable that they argue it is tantamount to a de facto subsidy of the unprofitable commercial aviation division.
BTW, I'm not necessarily in agreement with that position, but it's an interesting perspective.
I must have said it badly, the US defense industry being so huge is exactly what I meant to evoke when I said the Pentagon would buy from Airbus if they were as good.
I think Airbus commercial airframes are just as good, but I've read that their military hardware isn't as cost effective. I guess I'm taking that on faith, though.
My impression was that they told GM that if they wanted more Government money then they'd have to get rid of the CEO who has been at the helm while they reached this point. If you are going to agree to give them money at all, then that is reasonable.
Yet I did twinge when I read it. So maybe I'm thinking they shouldn't have been bailed out.
I think maybe the government stimulus/bailout should not be propping up companies (though the financial institutions seem a thorny problem). I'm all for beefing up the safety net. Unemployment, job training, education, health care, and maybe tax breaks and loans for the automobile companies that might rise from the ashes of the behemoths. Or tax breaks and loans for any company that employs so many laid off auto workers. Government running of corporations seems not likely to be a win.
For the record, I share the concern about the government running companies. I much prefer the government spending money to do government things like infrastructure.
That said I have no problem with requiring an CEO be fired in order to take money from the government.
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