With GM federal, will capitalism retain its vitality?

General Motors will operate in bankruptcy with an additional $30 billion investment — let’s not call it a loan — from the federal government, which will then have title to 60 percent of the company and can call the shots.
Shot-calling, however, is not a long-term, or even a middle-term, goal. President Obama believes GM can be rebuilt into a going concern and that the government’s stock can be sold to private investors as soon as that is accomplished. Neither he or anyone else in Washington talks about when that might be or how much the government’s $50 billion stake in the company will have to be discounted.
For starters, however, the president has said he expects the new GM to build smaller, more fuel-efficient cars and have a smaller footprint all around.
A larger question that won’t be answered for many years is what impact the collapse of the car industry, which defined U.S. industrial supremacy for decades, will have on attitudes toward private enterprise and the proper role for government on the economic scene, here and worldwide.
Under both President George W. Bush and Barack Obama, Congress and the White House stepped into the breach with enormous amounts of taxpayer dollars to prevent the collapse of financial firms and keep the wheels of commerce turning. To some extent, the collapse of Chysler and General Motors was accelerated by the freeze-up of consumer credit. Primarily, however, the car companies were the authors of their own demise, were seen as too big to fail and were propped up by Congress to keep a serious recession from escalating into a disastrous depression.
If the eventual result is to make Chrysler and General Motors stock worth next to nothing, as are the corporate bonds which were converted to stock in the final agreement, will capital markets dry up? Or will investors feel a greater confidence knowing that the government feels a heightened sense of responsibility for the nation’s economic health?
As new cars begin coming off GM’s lines, will they all bear a Designed in Washington seal of approval? Will that 60 percent owner put the environment ahead of profit? Will the UAW expect its contracts with a revived GM to return to the good, old days — and make the new company uncompetitive once again?
Will Congress decide that the taxpayer now owns the company and should start running it with the people (read politics) in mind? The question is not academic. Speaking of GM’s profitable operations in China and Brazil, Rep. Dennis Kucinich, whose district includes Detroit, said: “It is unacceptable to ask U.S. workers to subsidize the exportation of their own jobs. The taxpayers’ investment should be used to protect American plants so that American workers can build the next generation of automobiles.”
Yes, but will it be acceptable to the taxpayers at large to require GM to return to practices that produced huge losses and required a govenment bail-out?
Interesting times lie ahead.

— Emerson Lynn, jr.