Statism is a word coined in 1919 according to the Merriam-Webster Dictionary. The concept developed earlier in the century and excited the "intellectuals" of Europe but did not gain favor in the United States until Woodrow Wilson's term in office from 1913 to 1921.
Statism is the concentration of economic controls and planning in the hands of government, often extending to government ownership of industry. Having failed throughout the rest of the world, it seems to be enjoying a revival in the Obama administration.
It does not come cheaply. This week we picked up the $50 billion tab for General Motor's debt. That's on top of the $20 billion already sunk into the company. Maybe that does not count for much in an administration that doubled-down on the Bush administration's bailouts.
General Motors, like Chrysler and numerous financial institutions, is now in the grasp of the Federal bureaucracy. Chrysler, or the segments that remain, will be part of the Fiat organization, hardly more functional than the company it is acquiring. The financial institutions may fare better since so many Wall Street insiders have joined the Obama administration, hopefully bringing some relevant expertise.
The administration tells us that it will redesign and reorganize these companies and all will be much better than before. President Obama fired GM Chief Executive Rick Wagoner this past March, replacing him with Fritz Henderson who now has the task of shepherding the company through this administration's version of the bankruptcy process.
GM was functionally bankrupt two years ago. Had it gone into the normal bankruptcy process at that time many of those with GM bonds in their retirement portfolios would have received some value in exchange. They can hope for about 10 cents on the dollar now. The Obama administration says that you will be able to invest in the new GM in just six to 18 months.
Most suppliers will get nothing on bills owed. The result will be further bankruptcies among the many thousands of companies supplying products to the auto assembly plants. That process will go on longer than 18 months. Parting out the remnants of the old GM could take years.
The Obama administration envisions a new GM built on an electric vehicle. In areas where electricity comes from coal-fired generators, which is most of the country, electric cars are more polluting than modern diesel engines. Then there is the problem of disposing of those big batteries, which have a finite life. Electric cars sound like they are good for the environment, so it is easy to sell the fiction that they are greener. The car should be called the "Taxmobile," in view of the cost to the taxpayers even before getting to regressive cap and trade and mileage taxes.
GM, once the icon of American manufacturers, had 45 percent of the U.S. market in 1980. Last year it was 22 percent and slipping. To be profitable GM has to sell about five million more vehicles each year then the current nine million. An over-priced, under-performing government-designed Taxmobile is not going to reverse the trend.
The same politician who railed against the Bush administration's deficits, who said he was going to go through the Federal budget with a fine-tooth comb, is the same politician who tells us he wants the Federal government out of these companies as soon as possible. Statism is here to stay, for now. In the long run we can hope that the only reminder will be the Taxmobile owned by those waiting for it to become a collector's item.[[In-content Ad]]
