American Elephants

The Never-Ending, Thrilling Tale of Automotive Muck-Ups. by The Elephant's Child
June 7, 2009, 11:15 pm
Filed under: Capitalism, Economy, Progressivism

The auto bailout will be a failure.  It will fail because of government.  Politicians do not understand the business of business.  Little things like meeting a payroll, finding someone talented enough to manage, producing a product that people want to buy are mysteries to the political mind.

When businesses fail, when they lose too much money for too long, we have longstanding remedies in bankruptcy law that allow businesses to reorganize in a way in which they can return to profitability. Some are determined to be viable, some are not and are liquidated.  This has worked well since the dawn of the Industrial Revolution.

Politicians cannot keep their hands off and their noses out. First there was Obama’s infusion of money, the firing of the CEO of General Motors, the conjuring-up of  a board of government functionaries to manage the bailout, and a special new kind of bankruptcy just for GM and Chrysler.

The process that was usually worked out carefully and painstakingly over around 18 months was cut to a couple of weeks for the Chrysler case, and complicated details were turned over to a 31 year old political science major who had dropped out of Yale Law School to work in the campaign.

Obama quickly made things clear:

What we are not doing —what I have no interest in doing — is running GM.  When a difficult decision has to be made on matters like where to open a new plant or what type of new car to make, the new GM, not the United States government, will make that decision.

This was said while Obama was making a call to the mayor of Detroit to assure him that GM headquarters would be staying in Detroit, not moving to Warren, Michigan as they were asked to do.  And the government was deciding which dealers to close, although the dealerships are privately owned  businesses who buy the cars that they sell from Chrysler and GM.

What is not being widely reported is the story of the pension funds.  Investment managers for 100,000 Indiana teachers, police officers and other civil servants poured millions of pension dollars into what the funds considered safe investments, secured debt in Chrysler.  They have asked the Supreme Court to block the sale of Chrysler to Fiat.  They argue that government intervention in the bankruptcy is unconstitutional since the government’s plan will pay unsecured lenders before those that were secured.

Dealers, privately-owned businesses who buy their automobiles from the auto companies, have been ordered to close in violation of state laws about franchising.  There are as many problems lurking in the G.M. bankruptcy as in Chrysler, or more.  Government is “not involved” in running auto companies, but Barney Frank has already intervened to rescue a dealer in his district, and get him off the closure list.  Other members of  Congress are concerned, for they have dealers in their districts too.  It is a mess, and a mess of government run amok.

The bankruptcy for Chrysler stiffs everyone but the United Auto Workers, who retain their plush salaries and work rules which were a major reason for the business failure.  GM will undoubtedly have much the same rules.  The lawsuits should be even more spectacular than Chrysler’s. Many voters are claiming that they will never again buy a GM product.

CAFE standards that would have been difficult to meet in ordinary times have been imposed on the auto companies.  Obama is anxious to require 15 percent ethanol, because he really favors ethanol, but that much ethanol in gasoline destroys engines, so car engines would have to be adapted.  Will anyone buy the little green cars that the administration prefers?  Not if they, like the Volt, cost $40,000 and only go 40 miles on a charge.

But fortunately, Obama has no interest in running GM.  That’s a relief!

Free to Choose, or Stuck With the Status Quo? by The Elephant's Child
June 7, 2009, 10:00 pm
Filed under: Foreign Policy, History, Islam, Middle East

President Barack Obama took credit Friday in Dresden, for improving the climate for Middle East peace negotiations.  “You’ve probably seen more sustained activity on this issue in the first five months than you would have seen in most previous administrations,” Obama said.  “I think given what we’ve done so far, we’ve at least created the space, the atmosphere, in which talks can restart.”

Amir Taheri begged to differ:

President Obama’s ‘address to the Muslim world’ was a masterwork of equivocation and political naiveté…

Unlike his previous statements, the Cairo speech didn’t include the threat of any action — not even further sanctions — against the Islamic Republic.  The message was clear: America was distancing itself from United Nations Security Council resolutions.

Obama also abandoned President Bush’s freedom agenda in support of Middle East democratic movements, saying “No system of government can or should be imposed on one nation by another.”

Of course, America didn’t “impose” any system of government on Afghanistan or Iraq.  All it did was to remove impediments to democracy in those countries.  A majority of Afghans and Iraqis, and perhaps even “Muslims around the world,” don’t regret the demise of Mullah Omar, a fanatical cleric, or Saddam Hussein, a brutal secular despot.

Meanwhile, back in the Muslim World, George W. Bush’s policy of encouraging  Middle East democratization has just produced spectacular results in the Kuwaiti general election.

In an important victory for the secular reformists over the Islamists, four women were elected to the 50-seat national parliament for the very first time.  The Islamist’s share of the vote dropped almost 30 percent from the last general election, the radical Muslim Brotherhood lost three of its four seats.

The election of women is a political earthquake for the Gulf Cooperation Council, a group of six oil-rich traditional Arab monarchies.  The women won largely because men decided to vote for them.  All four women represent the emirate’s educated middle class.

The election, with a 70 percent voter turnout, completely refuted any claim that democratization has little support in the Middle East.  Last year Pakistani voters reduced the Islamist’s vote share from 11 percent to 3 percent of the vote, and Iraqi voters nearly completely defeated Islamists in local elections.  Today, it appears that the Western leaning side has won handily over Iranian sponsored Hezbollah in elections in Lebanon.

George W. Bush simply believed that if people were free to choose, they would prefer freedom, so he encouraged it.   Too bad that Obama can’t see that.  America has played an important part in the beginnings of democracy in the Middle East.  It would be sad if that were not to continue.

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