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Salon’s Business Ignorance Brings Back the 80s

Jimmie | December 14, 2008 | Comments (0)

Do you remember during the 1980s when you could hardly pick up a newspaper or turn on the television without hearing about how the Japanese were buying up the United States and how the evil Republicans were helping them along by promoting that silly notion of free market economics? Well, it’s come back, in the form of this Salon article (via Stacy McCain). I admit, it covers a certain aspect of the way the left thinks pretty well, which makes it good blog fodder. The entire thrust of the article is that the Republicans who headed up the efforts to kill the Big Three Bailout only did so because other they wanted to protect the facilities in their states that are run by foreign-owned companies which is a bit of a change from the old anti-Japanese sentiments of the 80s, but not much. As McCain notes, it’s as if Salon couldn’t possibly imagine why someone might oppose the bailout on principle. The only quibble I’d have with Stacy’s characterization of the article is that Salon doesn’t merely suggest it, they make the accusation explicitly.

The fiercest opposition to the loan proposal — and nearly a third of the 35 votes against ending debate on the deal — came from Southern Republicans, and the ringleaders of the opposition all come from states with a major foreign auto presence. Not coincidentally, nearly all of those states — except Kentucky — are also “right-to-work” states, which means no union contracts for most of the employees at the foreign plants. The Detroit bailout fell victim to a nasty confluence of home-state economic interests and anti-union sentiment among Republicans.

This week Southern Republicans had a chance to go to bat for foreign automakers while simultaneously busting a union

This is nonsense on stilts. If Corker, et. al. really wanted to protect foreign automakers, they would have pushed the bailout for all they were worth. The bailout would have propped up the Big Three for another year or so without requiring that they make any fundamental changes at all. More importantly, the bailout would have put the Big Three’s business plans under the review and control of Congress and we know just what a bunch of whip-smart business minds inhabit the Capitol. The bailout would have guaranteed at least GM And Chrysler would continue to get their brains beat out by foreign automakers just as they have been for the past few years. The simple truth is that the Big Three have been no real competition for the foreign companies who have moved manufacturing plants into the South for several years. It would have been in their best interest for that to stay just the way it was.

Now, thanks to the Senators “whose bread is buttered by the Japanese” (as Salon calls them) the game has changed. Both GM and Chrysler are likely to declare Chapter 11 bankruptcy. That doesn’t mean that the companies will disappear, though Salon seems to think it does. It means that the companies will restructure. They will lose huge chunks of debt and a crippling union contract. Their production costs will immediately decrease, which means they will be able to sell their cars at a lower price. They’ll be able to write off unprofitable car lines immediately and focus on the most marketable ones. Instead of writing a business plan that has to please business-ignorant, agenda-driven Democrats, they’ll have to write one that pleases business-savvy investors, creditors, and potential customers.

In short, instead of facing three behemoth companies wheezing along on government life-support, foreign car companies will be facing three (or more) more agile, more efficient, more motivated companies that will be looking to take big bites out of their market share. How, exactly, is that good for Nissan or Toyota?

It isn’t, ans if Salon knew a darned ting about business, they would have killed this article the second it was proposed. But they don’t and so they proceed with the ignorant “the Japs are buying the government!” angle that turned out to be so much hooey in the 1980s. It wasn’t true than and it’s not true now.