Should we nationalize the Big Three?

By
Eoin O’Carroll                                                                     Read Spanish Version

From
The Christian Science Monitor

As
lawmakers debate a bailout package for the troubled Big Three
automakers this week, we’re seeing a word rarely spotted north of
Venezuela or west of Scandinavia: nationalization.

Last
week the Los Angeles Times ran an op-ed by Pulitzer Prize-winning
automotive writer Dan Neil, unambiguously headlined Nationalize GM.

An
outright federal government purchase of GM would have many benefits,
argues Mr. Neil. A state-owned General Motors would be able to
quickly void onerous contracts. GM is already competing with
companies abroad, like Honda and Toyota, that are already
quasinational, what with their government-provided healthcare and
pension plans. And Uncle Sam could avoid many of the strategic
failures – such as betting on SUVs instead of hybrids – caused by
short-term, quarter-to-quarter thinking.

A
state-run GM could help the U.S. transition to cleaner cars and
trucks. Neil writes:

We
need government-sized automotive help anyway. This country should be
putting millions of plug-in hybrid and electric vehicles on the road.
As far as I can tell, without big subsidies, there is no way in the
near term to build these vehicles and make a reasonable profit, due
to the stubbornly high cost of advanced batteries. Besides, if GM
were owned by the government, it wouldn’t spend time and money
litigating and lobbying against clean-air and safety rules.

Almost
as an afterthought, Neil adds that the government should take over
Ford and Chrysler, too.

Neil
is not the only one calling for a government takeover of the Big
Three. NYU economist Nouriel Roubini, who in 2006 accurately
predicted that the U.S. subprime mortgage crisis would balloon into
an economy-threatening credit crisis, has also called for a temporary
nationalization of Ford, Chrysler, and GM.

We
might even make a buck at it

A
government takeover might not be as expensive as it sounds –
especially considering that the real price tag may not be the $34
billion now being bandied about, but more like $75 billion to $125
billion. FireDogLake blogger Ian Welch, who advocates nationalizing
Citibank and GM, notes the relatively low upfront costs and potential
windfall of a GM buyout:

Buy
out the shareholders for the $3 billion their shares are worth, or
hey, be generous and pay them double – $6 billion. In the
current context, that’s not even real money. Get the best auto
people in the world and have them go in and restructure GM. Spend
the necessary money and make the necessary cuts.  Restructure
the company to serve America’s interests – get the Volt working,
increase mpg ratings, restructure the dealer network. Do it
all. Fix the company and make it viable again. Then, once
it’s working again in a few years, start selling it back to the
private sector. Do it right and the government will make a
significant profit.

Others
aren’t so sure. Robert Weissman, who edits the Multinational
Monitor, a bimonthy founded by Ralph Nader in 1980, argues that
nationalization of GM should be seriously considered, but that
getting government into the automaking business would involve making
hard choices:

[N]ationalizing
the companies would entail many complications and difficulties,
including managing relations with workers and plants around the
world, fair dealing with suppliers and workers at suppliers, and the
inherent complexity of running multinational auto companies.

Is
a true nationalization the best option? Maybe, maybe not.

A
public utility

Michael
Moore, who first became famous for his 1989 film, “Roger & Me,”
which described what happened in his home town after the GM plant
closed there, sees an opportunity to use the Big Three’s
manufacturing might to build a new transportation infrastructure. On
his blog, the filmmaker writes:

Transporting
Americans is and should be one of the most important functions our
government must address. And because we are facing a massive
economic, energy and environmental crisis, the new president and
Congress must do what Franklin Roosevelt did when he was faced with a
crisis (and ordered the auto industry to stop building cars and
instead build tanks and planes): The Big 3 are, from this point
forward, to build only cars that are not primarily dependent on oil
and, more importantly to build trains, buses, subways and light rail
(a corresponding public works project across the country will build
the rail lines and tracks). This will not only save jobs, but create
millions of new ones.

Mr.
Moore says that a government buyout of the Big Three makes sense
because, if the government loans them money and they default on those
loans, the government will end up owning them anyway.

A
Red scare?

Some
see the prospect of government takeovers as sinister. Libertarian
commentator Lew Rockwell, the president of the Ludwig von Mises
Institute sees shades of Soviet-style economics in Dan Neil’s
proposal.

Only
a complete economic ignoramus would believe that Americans would for
some reason be better at socialism than Russians (or anyone else).

Nationalizing
one or more of the Big Three is probably not politically palatable
for most Americans: A recent CNN poll showed that 6 in 10 Americans
oppose using taxpayer money to help the automakers. But many
Americans are not opposed to nationalization in principle. In June a
Rasmussen poll found a slim minority of Americans oppose
nationalizing the U.S. oil industry.

In
Sweden, the public is far less ambivalent about state intervention. A
late-November poll found that 68 percent of Swedes favor temporary
nationalization of Volvo, which is currently owned by Ford.

http://features.csmonitor.com/environment/2008/12/09/should-we-nationalize-the-big-three/