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UPDATE AT THE BOTTOM OF THE PAGE!!!
I know the readers of Cultural Capitol are probably sick of hearing me rant on this subject, and for your sake this will be my last post on the topic. The Editor has counseled moderation, and I know in my heart of hearts he’s right. But I can’t leave it without saying just this one more thing about the “popular” reaction to A. I. G.’s bonuses.
James Barron and Russ Buettner write in a human interest piece in today’s New York Times that “many [A. I. G.] workers felt demonized and betrayed. ‘It is as bad if not worse than McCarthyism,’ [an anonymous A. I. G. exec] said. Everyone has sacrificed the employees of A.I.G.’s financial products division, he said, ‘for their own political agenda.'”
Bless Barron and Buettner for trying to put a human face on this mess. But the execs who cry “I didn’t have anything to do with those credit problems” (James Haas) still don’t understand why their fellow citizens want to lynch them. Let me attempt to put a face on populist outrage.
The story in the Times today trying to defend Geitner puts the blame for his bad judgment (really, a complete lack of political common sense) on faceless “government lawyers” who told the Treasury secretary exactly what he wanted to hear:
On Tuesday last week, as he prepared for a meeting in London of the finance ministers of the Group of 20 nations, Mr. Geithner learned that A.I.G. by Sunday would send out the bonuses to employees at its financial products unit, which developed the risky derivatives now blamed for the global credit crisis.
With few senior political appointees on hand, the word came from one of the numerous career civil servants who keep the Treasury functioning through changes of administration, according to an official.
Mr. Geithner consulted lawyers. They told him the government could not override the contracts that the insurance conglomerate had signed in early 2008, when its financial products unit was fast losing money.
The Times piece tries hard to justify Geiter’s naivete, blaming his lapse on his “crushing workload,” and telling us he is “shouldering more crises on his slight frame than most Treasury secretaries ever have.” But that’s no excuse — either for him or for Obama. Geitner, whose instincts as the Times says “are that government should not dictate compensation issues to businesses,” suffers from the same free market fundamentalist dementia as a recent respondent to my earlier post. Let’s look at this pathology more closely in order to better understand it.
I guess the Big 3 were too big to fail. That is, our venal leaders were torn between fearing we’d revolt if they bailed out their buddies and fearing we’d revolt if they let a million more jobs go down the tubes. In the end I think it’s a good thing that they gave these pompous losers three more months to get their house in order before the day of reckoning comes. Once again strange political bedfellows made for a weird ideological tension behind the resolution. Conservatives want to break the back of organized labor forever, and in their view they’re not so much saving jobs as making sure manual laborers get paid no more than service industry employees. True liberals want the market to do its magic — even if that means losing a million jobs. Bleeding heart liberals want us to think of the children — of the soon to be impoverished northern states. The best possible outcome here, is for entrepreneurs of small companies that make small, incredibly efficient cars to spring up like mushrooms on the rotting dung heap of the big 20th century American auto industry. Even better, companies from Detroit and Milwaukee that make high speed light rail trains, tracks, services, and all the rest. But I’m not holding my breath.
Ronald Reagan and Lee Iacocca, Detroit, 1980
The clamor is coming from all sides: extend the bailout to the car companies.
The rationale for doing so is that it is responsible fiscal policy: only by saving automobile manufacturing jobs will we be able to save Michigan. And as Michigan goes, so goes the country.
The holes in this argument are big enough to drive a Hummer through.
In the first place, whatever happened to the jobless recovery of 2003? I thought all the manufacturing jobs were already gone?
In the second place, as I have argued before, bailing out failing industry is a mistake. A firm line must be drawn between what is public capital and what is private capital. We have worshipped in the temple of private capital for two and a half centuries, while the idea of public capital has never been adequately articulated. The agopee of “privitization”, that is making what was public capital private, came with Reagan.
Reagan privitizing a Michigan State Fair T-shirt
The end of that privitization happened when Henry Paulson was handed the keys to the Treasury and used them to write checks to his former pals in the financial industry. “Don’t worry boys — you’ll get your Christmas bonus this year!” The same is about to happen to the Big Three if they get their “bailout”: Executives will get to save their houses, while the workers’ jobs are eliminated and shipped overseas, and their retirement is left to a non-existing public dole. GM will not be able to build giant inefficient machines in the future. The market will not allow it. To prop them up will not save jobs for workers, it will only hold open the fire escape doors long enough for the rich to get out while their house is burning down.
Real fiscal stimulus has to do what the New Deal did: guarantee the future of the Re – Public by funding public capital.
save the dinosaurs!
The Democrat leadership has obviously not gotten the memo on ideological shift. Here is the article from the wires.
Democratic Congressional leaders urged the Bush administration on Saturday to consider using the $700 billion bailout for the financial system to aid distressed American automakers, in a prelude to what may become urgent negotiations over additional economic stimulus measures.
This is a bad idea for so many reasons. First, it sets a bad precedent. Every progressive policy idea of the next four (let’s hope eight) years will be stained by the memory of this capitulation to corporate interests.
Second, it invites an environmental nightmare. What’s next? Bailing out the coal industry because it’s losing jobs to green energy? Bailing out AIG because they’re “too big too fail”? (Oops. Already done.) These guys are going out of business because they thought cheap gas would last forever. They are dinosaurs who deserve to die. Maybe if we’re lucky their carcasses will provide fuel for someone in one hundred million years. They even knew the good times couldn’t last, but they put that nasty thought out of their heads for instant gratification of quick profit. This is how the AP put it:
At Ford Motor Co. they called it “Blue,” a team set up around the year 2000 to design an array of small, fuel-efficient cars to compete with the Japanese. It didn’t get far because no one could figure out how to make money on low-priced compacts with Ford’s high labor costs.
Besides, the automaker was racking up billions in profits by selling pickups and sport utility vehicles. Times were good and gas was cheap.
If the government commits to maintaining failing technologies because people have jobs that depend on them we are never going to get ahead of the energy curve. If Chevron and ExxonMobil get bailouts there will be an insurrection right here in the good old U. S. of A.
Third, it validates the idea that corporations are the equivalent of citizens. It should not need to be said, so why am I saying it? Corporations are not people. They may have a lot of money, but corporations are not citizens. The business of government is citizens, not collections of citizens, or business syndicates, or legal fictions. If the Dems in Congress want to do something for the people who will be laid off if the auto companies die, put money into infrastructure or unemployment benefits. That at least will tide workers over until a true entrepreneur comes along with a better job to give these men and women. When you work in a factory it doesn’t matter if you build SUVs or hybrids — it’s all the same to the assembly worker. But if you bail out GM and Ford, all you will see for the next ten years are more SUVs and Hummers.
This is what Reagan really felt about you.
Conservative, free market dogma states that taxes are always bad and always restrict growth. On the other hand, the more money you have in your pocket, the faster the economy will grow as you spend those dollars on goods and services. Lower taxes always and everywhere means greater growth. Arthur Laffer put the idea into econo-speak in the 70s. If you feel like reading the Wikipedia entry (written by a freemarketeer) you can see how scientific sounding defenders of this ideology are. They have spent the better part of 30 years developing ironclad, mathematical proof that taxes are inherently stifling to growth. Alan Greenspan gave the lie to this pseudo-scientific nonsense last Thursday when he said ““The whole intellectual edifice [supporting supply-side economics] collapsed in the summer of last year.”
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