While I don't usually discuss politics, I can't turn aside from the Obama Administration's seizure of General Motors. President Obama and his advisers have committed a mistake of historic proportions, the kind that future generations look back on in amazement.
The fundamental rules of capitalism dictate separation between government and business. Unless these two systems — with their very different goals and their very different rules — remain disaggregated one from the other, the inevitable result is disastrous. At this point, the only question is how bad the situation will become.
The past several months have show just how deadly government interference can be. Over $30 billion of wealth has been destroyed as government subsidies disappeared to no effect: can you imagine any private institution that would dole out money with such abandon and with so little prospect of success? As bankruptcy approached, President Obama used his official and unofficial powers to browbeat bondholders.
As for the prospects for the future, one need only look to previous horrible examples, from UK (Jaguar) to France (Citroen) to Romania (Dacia). Governments run car companies not based on how well the cars will run, how much profit will be made, or return on equity; they run car companies as they run any other enterprise: politicians maximize votes, not profits. I expect a series of ever-more desparate political interventions in the marketplace over the next several years to keep GM and Chrysler afloat regardless of the economic sense or economic consequences.
Topics: · business · government
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