General Motors Bankruptcy

General Motors Corp. filed for bankruptcy and became the second-largest bankruptcy in U.S. history. According to the Wall Street Journal:

President Obama defended his decision to take a majority stake in GM, saying it was unavoidable and temporary. “We are acting as reluctant shareholders,” he said in a televised address.¹

The story went on to state:

Some Republican lawmakers called the move another sign of the administration’s deepening incursion into the private sector. And the risk remains high that the administration or Congress could meddle in the company’s day-to-day affairs, an experience familiar to banks that took government bailout cash last fall.

Since it was reported that General Motors approached the government about a possible bailout², this scenario reminded me of the following quote about how business leaders often seek government to intervene for the so-called “public good”:

Businessmen have done more than their full share to foster the active regulatory state from its very inception. Consider William Simon’s recent description of the relation of business and government as he witnessed it during his tenure as Secretary of the Treasury in the 1970’s:

“I watched with incredulity as businessmen ran to the government in every crisis, whining for handouts or protection from the very competition that has made this system so productive. I saw Texas ranchers, hit by drought, demanding government-guaranteed loans; giant milk cooperatives lobbying for higher price supports; major airlines fighting deregulation to preserve their monopoly status; giant companies like Lockheed seeking federal assistance to rescue them from sheer inefficiency; bankers, like David Rockefeller, demanding government bailouts to protect them from their ill-conceived investments; network executives, like William Paley of CBS, fighting to preserve regulatory restrictions and to block the emergence of competitive cable and pay TV. And always, such gentlemen proclaimed their devotion to free enterprise and their opposition to the arbitrary intervention into our economic life by the state. Except, of course, for their own case, which was always unique and which was justified by their immense concern for the public interest.”

One wonders whether anyone – with the possible exception of a few right-wing ideologues – any longer supports the free-market system as an inviolable desideratum; whether anyone is willing to bear its costs in order to preserve its benefits. Talk is cheap, and accordingly business people often talk as if they favor capitalism. But the blatant hypocrisy of their rhetoric suggest that it is either a political device, deliberately employed as part of a “public relations” strategy, or a mindless reflex inherited from the past and readily abandoned when it seems incompatible with short-run gain.³

What’s your view point?

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Sources:

1. King, Neil, Jr. and Sharon Terlep. “GM Collapses Into Government’s Arms”. 2 June 2009. The Wall Street Journal 3 June 2009.↩
2. Rasmussen, Scott. “Americans Have Voted ‘No’ on GM Bailout From Day One.” 1 June 2009. Rasmussen Reports. 3 June 2009.↩
3. Higgs, Robert. Crisis and Leviathan: Critical Episodes in the Growth of American Government. Oxford: Oxford University Press, 1987. 243.↩