Strengthening Constitutional Self-Government

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Creative Destruction

David Brooks writes against bailing out Detroit. From this good article I especially liked this: "It is all a reminder that the biggest threat to a healthy economy is not the socialists of campaign lore. It’s C.E.O.’s. It’s politically powerful crony capitalists who use their influence to create a stagnant corporate welfare state."

Discussions - 5 Comments

Perhaps Brooks could also focus a bit on the unions, or would that be politically incorrect?

The best case scenario is this: GM files for Chapter 11 bankruptcy, the court reorganizes the capital side of the business. However, GM isn't even showing a Net Operating Income right now, so mere capital reorganization isn't enough. The cost of labor, approximately $30 an hour more than non-unionized Toyota and Honda in the U.S. is killing them. In Bankruptcy a judge would have the power to break the union, throw out their contract for extravagent pay and health benefits, and allow GM to compete.

Why hasn't the company done this on its own? Law--passed by Congress--that makes it an "unfair labor practice" to bust unions. Instead you have to deal with them, and this is the result. Why the CEO's don't push for Chapter 11, I don't know, but it is foolish of Brooks claim this is merely a case of "corporate welfare." The need for corporate welfare was caused by GOVERNMENT REGULATORY POLICY that empowered unions, and made GM an easy target for competitors. Politicians messed up the marked, imagine that.

Is Obama a crony capitalist? I doubt it. The reason he supports the bailout is because he loves unions. When he's in bed with the unions as much as he is, do you think he'll allow a judge to bust the union contract...not a chance. Furthermore, Obama's long-term plan seems to be that since unions have made American auto uncompetitive, the solution is to force unions on the other auto plants in America. Then everyone will be forced to make over-priced vehicles! This is why Obama opposses the secret ballot. He wants union bosses to be able to bully workers at non-unionized plants into voting in the UAW. Then, thanks to government regulation and union backing we'll have a true "bailout" with everyone equally unprofitable. "Crony capitalism"...it makes me wonder if ole Brooks hasn't caught a touch of populism.

Clint:


You are right to point to unions and regulations and a number of other factors. Plenty of blame to go around.


But if catching a "touch of populism" means recognition that big business can be as dangerous as big government, then I think that is a good thing. There is no question we all reap the benefits of big business: cheaper prices, accessible products, etc. We see the same problems, however, that we see in government. The larger the entity, the more separation between those in control (board of directors/politicians) and those whose interests are supposed to be served (shareholders/citizens). As a result, there is a greater propensity to diverge from the wishes of the shareholders/citizens.


There is a complete disconnect between what "capitalist cronies" earn and the profitability of the company. I suspect that the correlation between what one brings to the table and what one earns is much more sensible in the NBA or the NFL. At least athletes, on average, offer some value in return for the multi-million dollar contracts. There are simply too many in the corporate world bringing in millions of dollars while their companies go down the tubes.


I'm not saying Mr. Brooks is entirely right on every point he makes, but I do think conservatives need to realize the corporate world can be as repugnant, if not more, than our ever-growing bureaucracy. We can thank the dimwits at AIG for helping speed that process along.


Unfortunately, you are absolutely right that Senator Obama will only enhance these problems. Rather than look for real solutions, the tax-and-spend reflex will kick in.

Obama isn't a crony capitalist exactly. He would be glad to use government money to bail out some businesses and use the power of the regulatory state to give other businesses a competetive edge AS LONG AS THOSE BUSINESSES PLAY BALL. It is not about giving some businesses immortality, it is about power and giving competetive advantages to companies that are connencted and subservient to his agenda increases Obama's power. Same thing with the unions. They help Obama and he helps them (with card check for instance), but only to the extent that it advances his purposes. So one could say that Obama is a crony capitalist, and a crony unionist, but what he really is is a corpratist. The amazing thing is that Obama has never really hid this part of himself. It is in DREAMS FROM MY FATHER. In that book, it is pretty clear that he would prefer an economy managed by cooperation between business, "community organizations" and of course the government (with the government having the predominant say). This vague corpratist vision seems to have been his hope for revitalizing the south side of Chicago. You can almost feel his frustration at lacking the power to bring the various groups together and nudging them to play ball. Well, he has the power now.

spell check - it should be "corporatism"
not corpratism

Have Brooks (and Schramm) become Ralph Nader fans suddenly? Odd.

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