Dynamist Blog

The Tangled Political Economy of Government Motors

Like Cato's Dan Mitchell, quoted in this LAT article on what the government should do with its auto company stock, my first instinct is to say, "Divest immediately." But I'm not so sure that's right. Owning a big chunk of the auto companies--and (this is important) hoping to profit from that ownership--could check some of the worst excesses of the Obama administration's lust for industrial control, starting with the belief, against all evidence, that U.S. automakers would be more successful if they abandoned SUVs and concentrated on competing with the Prius and Civic. Trying to maximize shareholder return might persuade policy makers to keep out of management decisions. On the other hand, it's a great incentive for further subsidies and favoritism. (Even the NYT, bellwether of liberal conventional wisdom, notes, for instance, that cap-and-trade "is almost perfectly designed for the buying and selling of political support through the granting of valuable emissions permits to favor specific industries and even specific Congressional districts.") All in all, a no-win situation.

The Government Motors Debacle

Tough but fair words from Jim Glassman:

I head a nonprofit group that encourages developing nations to adopt policies that will lead to prosperity — starting with transparency and the rule of law — and hold up America as a model. Yet in its high-handed dealings with Chrysler and G.M., the Obama administration reminds me of an irresponsible third-world regime, skirting the law and handing economic prizes to political cronies.

How long before the UAW dumps the stock? And, if it doesn't, how long before Ford seeks to decertify the union and replace it with one that doesn't own the company's competitors?

ArchivedDeep Glamour Blog ›

Blog Feed

Articles Feed