Just imagine for a moment that you are a retired contractor, struggling to get by on your pathetically shriveled 401(k). when your ne-er-do-well child suddenly comes to you saying he’s got this idea to start buying derelict homes and rehabbing them for resale. He asks you to stake him with a $100,000 loan (about half of what you’ve got left in your retirement fund), promising to repay you when he sells his first couple of houses. You know the kid’s flat busted and has been laid off from his job as a dishwasher, so you want to help, but you’ve also seen his carpentry skills: The doghouse he build in high school fell apart on a windy day, and his own house has a leaking roof, needs repainting, and all the plumbing leaks. You’ve also seen his business skills: He plays the Lotto excessively, hasn’t saved a penny, and buys most of his supplies at the local 7-Eleven.
Would you front this kid half your money?
Well, if you really loved the kid, and if he was in danger of losing his house, you might want to help,. But the smart thing to do would be to offer to go in with him in the business, acting as the contractor, so that you could train him in the necessary business and contracting skills, and at the same time make sure the rehab jobs got done properly.
That might work out. Your son might never learn to be a master carpenter, but at least you’d have a good shot at getting your investment back.
What wouldn’t make sense would be to just hand over the $100,000, and say, “I’m going to stay out of your way son. Good luck, and remember to pay me back when you sell a few of those houses.”
Crazy, right? And yet that’s what the Obama administration’s auto industry “rescue” plan amounts to.
We Americans like to fancy ourselves the supreme rationalists, but when it comes to economic policy, we are as mired in superstition and religious dogma as any theocratic society in the world.
Our religion is “free-market economics,” which posits that an “invisible hand” of competition takes care of all problems, leads to the optimum outcome in terms of distribution of wealth and standard of living, and ensures maximum success in business.
Looking at the auto industry rescue program objectively, you have to ask why President Barack Obama would insist that the government, despite being the major owner of both Chrysler and General Motors, is refusing to demand a primary say, or really any say, in running those companies. I mean, if you are the major shareholder—and in this case “you” is not just the government, it is all of us, the taxpayers—you should be running the company. It is the government that should be naming all the members of the boards of directors of the two firms, and it is the government that should be deciding who will be the chief executives.
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DAVE LINDORFF is a Philadelphia-based journalist. His latest book is “The Case for Impeachment” (St. Martin’s Press, 2006). His work can be found at www.thiscantbehappening.net