US and Canadian “old big three” auto industry.
It is justified to criticize the management of the US and Canadian “old big three” auto industry, for the lack of foresight, and not to forget the responsibility of their boards. However society should have a problem when the critique comes from the political and government establishment that over the past three decades has had more responsibility for the auto industry’s demise than the industry itself. Whose house is of glass, must not throw stones at another.
I can’t imagine any reasonable thinking person believes that political mocking of the auto Industry’s management for flying private Jets to Washington will solve anything. I trust such populist politics does not set the tone for President Elect Barack Obama’s administration’s approach to solve the fundamental problem facing the United States and the world.
The reality is that the underlying causes to the acute problem in the automotive industry, is a result of decades old systemic diseases in the US economy.
Issues that unsolved are allowed to escalate into adversity, such as insufficient investment in socially relevant research, education and the absurd cost of healthcare that contradicts its own purpose. Also, outdated insurance and pension systems and labor laws, and a financial and bank sector that has been allowed to go berserk. Technically, the cause are faults in the economy’s allocation mechanism that hampers economic production, that unsolved inevitably will cause different degrees of social, economic and ecological adversity and, at its worst stage, political instability. The significance is, that these are issues that strictly are government’s task and accountability to society to address and solve, and not private sector’s. It is therefore odd when the politician a society elects and pays well to ensure that government meets its task in the economy, is heckling the private sector such as General Motors, Ford or Chrysler management.
The reality is that it is foremost government failure that is to blame for conditions. Where in good times, industry and banks fail to invest enough in research and development, and instead are fixated on the stock market and disburses excess remuneration to management and profits to shareholders, and in difficult times they can extort government and the taxpayer’s for bailouts. It obviously doesn’t work, never has and never will.
The tragedy is also that the financing of the governments bail out is a transfer via taxation of wealth from low and middle income to high income bracket. Further, resources and tax used for bail out obviously cannot be used in other directions, such as research, education, and healthcare which are crucial for the future. The current situation in the economy should be a reminder that democracy, and sustainable quality of life and a sound ecology, entirely depend on investment in sustainable economic production in business that distributes wealth in local and regional economies via better paid employment. The significant problem is sustainable economic production depends on understanding in the society that makes up the economy.
Understanding that is produced by research and distributed in society by education and a free press and a free flow of information vigorously discussed. Hence the voters must admit and take their responsibility.
Ultimately, in democratic elected representative governed mixed monetary economies such as US, Canada, and Germany, it is the private sectors task to in pursuant of profit invest in economic production. Government’s task is to set the legislative framework and provide the product and service the private sector fails to provide. When government fails in its task, the market and capitalism also fails and the society that makes up the economy suffers.
Hence, that is what General Motors CEO Rick Wagoner and the CEO for Ford and Chrysler should tell politicians such as Senator Harry Reid and others - it doesn’t need to be that way!
OISD
November 27, 2008