Tuesday, March 31, 2009

A Tipping Point

There's plenty of buzz today about a president of the United States removing a chief executive officer from a corporate office. The same apparently goes for the board of directors. The removals took place as part of the U.S. effort to restructure General Motors while funding its recovery with taxpayer money. At the same time, the administration "directed" Chrysler to merge with Fiat. It seems the powers in Washington decided that Chrysler, already on life support for a long time, had fresher management and deserved more time to affect a turn around.

Having the president remove a corporate manager is, I believe, a first. On the other hand, having the federal executive intervene in the corporate world is nothing new. In the last century alone the federal government has nationalized the railroad, banking, steel, and coal industries at one time or other. In every case, the industry in question returned to the private sector promptly, sometimes aided by judiciary decision.

For Americans today, the big questions is not so much the takeover as the return. When Wilson, Roosevelt, Truman and Reagan took their turn at nationalization, they did so with years of experience behind them as well as a firm belief in the capitalist system. Today, the man in the White House is a novice politician with what appears to be a decidedly receptive view of alternative economic systems.

I find it interesting that Obama sees fit to remove the CEO at General Motors, but leaves the GM "head" of the United Auto Workers in place. Granted, GM management made some really sloppy decisions for a long time. I bought one - a 1971 Vega - and never made the mistake again. But General Motors didn't make all of these decisions in a vacuum. Anyone who would believe that the UAW is blameless regarding GM's demise is only deluding himself. I thinks it's reasonable to say that a management-union partnership brought this company down. That Obama "stopped the buck" at the feet of GM's CEO is telling. To be fair, the president was equally tough on the leadership of the American International Group (AIG). It's not quite a corporate parallel, but still worth noting that, unlike GM leadership, those folks overwhelmingly identify with and contribute to the Democratic Party.

So how soon before the federal government returns GM to private ownership? Who knows? We taxpayers may be funding the company for a long time. That could be followed by bankruptcy. For certain, the company will change. For certain, the company will not disappear. Most important, what ever comes out at the end of this long tunnel, let's hope it is in private ownership. If it is not, capitalism in America may be at a tipping point, and stemming the flow away from it may be downright impossible.

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