Who Gets Saved?

First let me thank my old friend Stanley Aronowitz for his comment to the blog on Capitalism. Stanley suggested that most of what the Obama team was doing was to save Wall Street for the next bubble and bust. I admit to getting over-involved in the technology of how capitalism works that I lost sight of the woods for the trees. My argument for freeing up credit was an example of how one can get involved in the everyday working of the system and lose the overall view of who is being rescued and who is being suckered.

What brought home to me the uneven distribution of the rescue plan was the Obama treatment of the auto industry and in particular GM. Be assured that I have no particular love for GM or its CEO Rick Wagoner. But just look at the contrast of how the Obama folks are dealing with the banks, especially the big ones like Citi Corp, Bank of America and Washington Mutual. They just get TARP money thrown at them. No suggestion that their CEOs get canned as with Wagoner. Yes, Wagoner and GM screwed up, but probably a lot less than the CEOs of the major banks. I would argue the bank guys are far more responsible for the present economic crisis than Wagoner or GM. The latter have severely hurt the company, but GM did not cause the meltdown. THE BANKS DID.

I have another concern regarding GM and the thousands of auto workers the company represents. There were many people saying we should just let GM go bankrupt. Are we willing to let all manufacturing in this country go by the wayside? That’s the implication when the Obama folks throw money at the banks but tell the auto industry they have to do all kinds of things to be eligible for the bailout. What we have here is a double standard, one for the banks and another for manufacturing. And therein lies my problem.

Historically the American auto industry, with the help of the Bush administration, never recognized their need to change. Remember Bush refused to do anything about the mileage problem, and finally when they did something they did not ask for change until 2020. Yet the industry would have really been helped if the former administration had said in 2005, “you got five years to make cars that get 30 miles on a gallon.” Could GM have done that? Of course they could have. But GM, like the Bush administration, were riding the credit bubble. So GM, instead of concentrating on making the EV1 (their electric car) more marketable, they made the Hummer instead. Why? Because the profit margin on the Hummer was five times what it might have been on the electric car. There was no leadership from Washington to do anything but what they were doing. Bush really loved the big party and thought it would go on forever.

What I find so disturbing is the difference between how the Obama folks are handling the banks versus the manufacturing companies. There seems to be an utter disregard for saving our manufacturing base. We are well on our way to becoming the white collar professional class workforce of the world. Is that what we want to be? That would mean the traditional path for poor people to make it into our middle class would totally disappear. Is that what we want? I would hope not, but that’s where we are headed.

I would argue that if we are interested in saving jobs and creating new ones, we had better take a hard look at what is happening to our ability to make things. If the present trend of “Made In China” continues, here’s what we could be confronted with. In our next military crisis (that I hope doesn’t happen, but just in case it does), we will have to make sure that China can make all our stuff, because we won’t have the facilities or the know how to make any of it ourselves. I’m a peace-nick, so imagine me having to make a case for the maintenance of a manufacturing base as a national security issue. But there it is staring us right in the face,

Getting back to saving the auto industry. If we look at the consequences of letting the industry die, the number of jobs and businesses that will go bust is just mind boggling. There are whole towns, like Jaynesville, WI, that can give us good case studies of what happens if we continue along the path of “let em go bankrupt.” It is millions of workers both employed and on pension who are going to end up on the welfare rolls. These people are all part of a system that grew up during the big bubble party. Now that the party is over, there seems to be an attitude of “well its to bad for them.” And in the meantime the top guys at AIG and now Fredi Mac are getting bonuses as a reward for really f---ing things up.

Obama, your administration is in the triage seat. Lets start being fair about deciding who drowns and who gets saved. Remember all those campaign pledges to the blue collar workers. If you don’t, Joe the Plumber will eat you up comes 2012.
Thanks Kate N.H.W.Y.