Little Guys and Corporate Bailouts
FDR campaigned as a champion of the little guy against the elites and swore to protect their interests. But when his economic plan starting coming together, it amounted to a cartelizing corporatist fascism: using the state to aid large corporations and serve their interests at the expense of everyone else.
It was a policy that Henry Hazlitt blasted in the pages of The Nation as anti-liberal, and his comments led the magazine to give him the boot. The liberal establishment, despite all their suspicions about capitalism, had decided to pillage the middle class on behalf of the capitalists. It was a policy that also led John T. Flynn--with all his progressive credentials--to say enough is enough: the result was his classic book The Roosevelt Myth.
And so we now have the Obama administration in formation--rising to power on the promise of helping the weak--plotting a bailout of General Motors, taking from everyone to give to a fat-cat company that cannot be saved in the long run. He stands in the FDR tradition here, in the worst possible way.
Comments (13)
newson
...as mooted by n. joseph potts:
http://blog.mises.org/archives/008253.asp
Published: November 8, 2008 7:00 AM
Krazy Kaju
As a Michigander, it's amazing how many people here in Michigan support the bailouts of the "Big Three" and how many love big union monopolies.
Published: November 8, 2008 9:22 AM
maera
Ah, corporate welfare. And the little people are satisfied with the odd tax rebate check.
If the big three were allowed to suffer, wouldn't they simply end up being merged into one or two corporations rather than disappearing altogether?
There's already a certain amount of redundancy because the interiors & engines of certain vehicles are manufactured according to the exact same specs then given a different exterior according to whichever maker claims to be the producer.
Published: November 8, 2008 11:48 AM
charleydan
Unions??? Reagan all but destroyed unions with deregulation. They need regulation to survive. Trucking was never the same since. The cost to the consumer has plummetted.
They need that regulation to robb from one class of people to allow another class a higher standard of living. When it is not regulation. They need government support to keep the workers standard above others.
Unions lobby constantly for government support either through restricting trade or support to industry. There by robbing from all to allow a few high wages.
Welcome to the worker elite.
Published: November 8, 2008 4:28 PM
gfh
These below market rate loans merely make the cost of capital cheaper than what it would be to companies that are failing (if they could even get that capital from a private source in the first place). Pelosi and co.'s claim is the loans are to 'tide them over' until they can get a vehicle on the market the consumer will demand-presumably a smaller, more fuel efficient model. This is a gross misallocation of tax dollars. It is a misallocation because it forces the taxpayer to trust that the auto executive will do as they say; that they won't use portions of the loans to offset what would otherwise be reductions in bonuses, salaries, or dividends elsewhere.
It actually creates a disincentive for companies to field alternative products to the internal combustion engine b/c it sustains a model that is not viable in the wake of $150 barrel oil. The recent declines in the the price of oil will likely persist through the recession, long enough that these loans will fall off of the front page. Because of high risk, below market rate loans, when the economy picks back up again, these companies will be less further along on a new product than they would otherwise if they had the perverbial 'knife at their throat' to hit a home run.
Published: November 8, 2008 9:35 PM
Danny
This is so pathetic. The problems in these companies have been apparent for decades, but all of a sudden there is a crisis that only government can solve.
One (of several) problem(s) -- a growing population of retirees and non-productive workers being supported by a dwindling population of productive workers. Sounds like an empire that I know...and the end will be the same, however more catastrophic for the empire as it has a printing press that will allow the problem to be sustained longer than it otherwise should, causing the crash to be worse than it otherwise would.
Published: November 8, 2008 10:16 PM
Ohhh Henry
Is Obama going off half cocked?
I recall reading that FDR kept his trap shut in between election and inauguration. As much as Flynn criticized FDR for supposedly letting the banking crisis fester by not responding to Hoover's pleas to help come up with a plan, it doesn't look good when the chosen one is acting like he's already in the driver's seat. Imagine how, once he's actually in power, he'll treat anyone who has balked at following his premature orders.
It appears that he already has his Robespierre.
"Emanuel was so angry at the president's enemies that he stood up at a celebratory dinner with colleagues from [Clinton's 1996 election] campaign, grabbed a steak knife and began rattling off a list of betrayers, shouting 'Dead! ... Dead! ... Dead!' and plunging the knife into the table after every name."
And in international news ...
The International Monetary Fund may soon lack the money to bail out an ever growing list of countries crumbling across Eastern Europe, Latin America, Africa, and parts of Asia, raising concerns that it will have to tap taxpayers in Western countries for a capital infusion or resort to the nuclear option of printing its own money.
I suggest that they christen their new notes the "Imf". As in, "Imf wishes were horses then beggars would ride."
Published: November 9, 2008 10:32 AM
vlad popovic
I hate the word boycott, because it is usually used by collectivists, but here goes....
Since we don't seem to have any control over how our tax money is spent, it seems the only way to work against these clowns is to vote them out with our dollars.
We don't need Wall St banks to invest: we can buy stocks (in companies that make real profits, in businesses that make sense) without them if we want, and there are a lot of other ways to employ savings anyway. Investing in our own abilities by starting our own businesses perhaps?
We also do not need to buy cars from the bailout three. They can steal our money now, but we can take our business elsewhere later. My Jeep will be the last Detroit vehicle I purchase, in spite of the fact that I like it well enough. Buying from them now is like going to a pawn shop and buying back your own possessions after they were stolen from you at gunpoint the day before - you may get a good deal, but you sure aren't satisfied.
Of course no one here will be surprised when the government protects it's investment by erecting trade barriers to save "the industry" one more time. Maybe only the subsidized "green" cars will be "green" enough to pass government standards. They will come from the recently bailed out - but their competitors will somehow fail to meet some carefully crafted legislation.
So here is my proposal: Mises Institute, or some other private entity creates a free-market version of the blue eagle. A certification that "no taxpayers were harmed in the making of this...." That way the consumer would have a clue about the true cost of the products and services they are buying. Also businesses would need to decide whether government assistance is worth the loss of goodwill associated with it. If nothing else, it would be an additional revenue stream for the Mises Institute!
Published: November 9, 2008 10:42 AM
Danny
Vlad
Your proposal deserves consideration. I have been thinking about another effort, and that is to send letters / emails to the titans that are standing in line for government money.
The letters would hit hard on the immorality of their request -- theft is still theft, even if you try to hide it by using the government as the midle-man, etc (regulars to this site can write this out better than I can). That the only way the request can be met is to tax all of us directly, or add the debt to the burdens of our children and grand-children, or to print money and drive up inflation. Then hit directly on the specifics of the issue for the company involved. If we could send hundreds such letters to the perpetrators, along with letters to the editor of hometown newspapers, etc., this may have some impact. My entire purpose is to shame them...if shame is possible, I can't say.
That is my dream anyway -- as I won't give up, I am looking for some outlet.
Published: November 9, 2008 2:16 PM
Goldman Sachs
Buffet is ours. Paulson is also ours. Emanuel is ours. And white house is ours. Even if Marx was the treasury secretary, he, too, would be ours.
Mail to: toobigtofail@goldmansachs.com
Published: November 9, 2008 5:44 PM
prettyskin
One of the Rockerfeller heirs, Nicholas Rockerfeller, said to Aaron Russo: Why care about the little guy, just take care of yourself and your family.
--A dynasty that does not stop until absolute power is achieved.
Published: November 9, 2008 6:02 PM
Wyche
Competition is a sin.
We get the losses the big corporations get the profits.
No risk.
Fascism, capitalism in a bubble.
;)
Published: November 9, 2008 10:42 PM
Michael A. Clem
Competition is a sin.
Competition for government handouts is a sin. As far as I'm concerned, the businesses can be run any way they want, as long as they aren't getting taxpayer money. That would be closer to capitalism.
Published: November 10, 2008 8:57 AM