July 15, 2024

The Fallacy of Government Running Businesses

Business Discovers Drawbacks to Government Aid

The banking industry, the insurance industry and finally the auto industry have taken their turn with government money controlled by the Obama administration under the premise that they were all too big to fail.  The bankers and insurance executives are finding out how difficult it is to return the TARP money, the  auto industry is following suit and will find out that “When you make a deal with the devil, you will always be a junior partner.”

This was recently noted by a dealer News Letter “DealersEdge Editorial

There is an old saying that is making the rounds among the business pundits these days- “When you make a deal with the devil, you will always be a junior partner.”

First a bit of perspective – Back in the 60s or 70s we can recall a news story of a Russian truck driver who was honored by the Kremlin for recording the highest fuel efficiency when making his deliveries. It seems he was able to alter his driving practices to reduce the consumption of fuel to the extent that he came to the attention of the central planners. He was honored at a Kremlin ceremony. However, he was able to reach this efficiency by taking some extraordinary actions to limit fuel consumption- like turning the engine off when going down hill and not turning it back on until after coming to a complete stop. The question not answered was whether or not he ever delivered anything on time. Such is the unyielding law of untended consequences.

While watching the President in the Rose Garden this week, with the leaders of the Detroit Three in the background, the thought crossed our minds – There is something very wrong with this picture.

Clearly the CEOs of GM and Chrysler are now junior partners in the U.S. auto industry. And while Ford has yet to make that Faustian deal with the White House, they certainly do not want to burn that bridge if their losses continue to eat up all that money they borrowed.

Perhaps the Auto Dealers can see it more clearly as the Obama Administration begins to make more business decisions for the Automobile Manufacturers. The dealers are on the front lines of the market and feel the effects of the manufacturers decisions.

Here’s an additional thought from Thomas Sowell on the matter of the Obama government running private industries:

The presumption that Obama knows how all these industries ought to be operating better than people who have spent lives in those industries, and a general cockiness going back till before he was president, and the fact that he has no experience whatever in managing anything. Only someone who has never had the responsibility for managing anything could believe he could manage just about everything.

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