Editorial: American Leyland Watch: This Is Gonna Be Great!

Michael Martineck
by Michael Martineck
editorial american leyland watch this is gonna be great

We the people now own about 60 percent of General Motors. Thank God. I know the old joke about being from the government and here to help; I’m familiar the anti-socialist swell that’s been rising since Obama’s inauguration. I am also convinced that right now federal control of what was once the world’s largest car marker could be the greatest thing to happen to the company since Alfred P. Sloan.

Putting aside the obvious—that the General would not have survived the battles of the last 12 months without Uncle Sam’s support. A controlling interest of GM in the fed’s hands isn’t all that bad for one simple reason: the government isn’t all bad. The bad gets more press. There are lots of success stories out of Washington that for lack of drama, or surfeit of politics, don’t immediately enter the fray when the free-market arguments start.

Defeating the Nazis or putting a man on the moon are the easy ones and not all that appropriate for comparison. The outcomes matter, though. Government can work. Just look at the Federal Communication Commission.

Created by Congress in 1934, the FCC was tasked with regulating America’s airwaves. To do so, they worked with wildly competitive private companies competing in invasive technologies that would shape the progress of the whole world. That’s not terribly different that automotive industry.

The FCC did it right, allowing industry to flourish, without choking itself to death. Radio and television grew thanks to standards, not despite them. David Sarnoff, an early president of RCA said at the time, “Competition brings out the best in products and the worst in men.” The FCC did, and kind of continues, to mitigate the worst aspects of capitalism, while allowing the best to develop.

Similar arguments can be made for the Food and Drug Administration, the National Aeronautics and Space Administration and (ahem) the Federal Reserve.

In each case Washington plays a role and the outcomes have been laudable. Ignoring an industry does not necessarily guarantee innovation. Sometimes the prescription is care and nurture . . . and that maybe the key to reviving General Motors, if not the whole auto industry.

When the government acts as an incubator, providing shelter from some—not all—market place stessors, the results can be strong. The National Institutes of Health, for example, provide funding and resources for research that is too new for the market or perceived as weak in profit potential. Genuine, important advancements in medicine, or any pursuit, frequently come from the long shots, as opposed to the safe bets. To date, the NIH has supported hundreds of raw ideas that turned into commercial ventures.

The Internet may be the best, most current example. Its core was conceived at the US government’s Advanced Research Projects Agency and based on a system pioneered by the US Air Force. Although it thrives in the force of the market, it took root well sheltered from those same forces. The original ARPANET that linked disparate labs had no business model. There would be no way to monetize the creation for next twenty years. That time gave the technology the opportunity to mature, bulk up and get ready for the world.

The exact mechanisms used by the Department of Defense or the NIH don’t transfer, but that is part of the point. The feds have, in some cases, actually been flexible. The capability is inherent in our system of government, even if it’s often ignored. In this case, there can be no cookie-cutter approach. We’ve never owned a failed car company before. But we own one now.

The benefit of which: insulation. The number one pressure corporations feel after they go public comes from the heat generated by quarterly reports. The stock market can provide a lot of energy to a company, and then too much. Investors focused strictly on three-month prospects, often do so to the determent of long-term goals. The market—especially in the hyper-capitalist USA—tends to make management near sighted. In an industry with relatively long development times, like automobile building, the trait can be disastrous.

With the federal government holding a solid majority of stock, General Motors will be more immune to daily market fluctuations. Our car company is no longer a slave to the quarterly report. It can look farther down the road; an attribute frequently sited as part of Honda and Toyota’s success. New GM can plan, hedge, execute and achieve.

And then we sell. I’m no Marxist. I just think big projects can do well with a big caretaker and there’s no one bigger than big brother. You want to establish the First (or Second) Bank of the United States, build a canal in Panama, an interstate highway system or re-establish a manufacturing icon, don’t be afraid of Uncle Sam. He is, after all, us.

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2 of 77 comments
  • BDB BDB on Jun 08, 2009

    My point is we've ALWAYS, since the beginning of the country, had a party that wants a strong and activist central government and one that doesn't. There's nothing un-American about either position.

  • Kkt Kkt on Jun 08, 2009

    Dieseldude, actually the case that Congress has the power to bailout GM is pretty strong, in my opinion. It's under the Interstate Commerce clause. If Congress can justify civil rights legislation, banning grow-your-own marijuana, etc. under Interstate Commerce, they can certainly justify a "loan" to the car companies. It has some defense implications, too.

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