## Monday, December 8, 2008

### Did he just say what I think he said?

Dan Neil thinks we should nationalize General Motors:
"What to do about the domestic automakers? My modest proposal: Nationalize GM.

To be clear, I mean that the federal government should buy GM; forget rathole loans or nonvoting equity shares. The company's stockholder value has been essentially wiped out. The company's enterprise value -- the lock, stock and forklift price -- is about $32 billion; its total debt is$45 billion. Let's make GM an offer.

If you feel the gall of free-market ideology rising, consider that the measures being bruited about as preconditions for a bailout -- firing GM's top management; forcing a bankruptcy-like renegotiation of contracts with the UAW, suppliers and dealers (it has too many); and creating a czar of product development to force the building of green cars -- are nationalization in all but name. I say embrace it. GM-USA."
Neil argues that there are many benefits to nationalizing GM. In particular, he argues that the government has a longer-term view that is crucial for getting GM prepared for the future:
"The government can afford long-term planning. Many of GM's strategic missteps -- such as betting large on trucks and SUVs and not investing early in hybrid technology -- were the result of willful shortsightedness at the board level, responding to a financial market in which shareholders look for the quick return. Putting Uncle Sam in charge would fundamentally enlarge the return-on-investment horizon."
I heard Mr. Neil speaking on NPR last week. He said that while markets are really good at responding to consumer demands, they are really bad at anticipating them. So, if you want to get car companies to invest in environmentally sustainable technologies, the government needs to step in.

This is a terrible, terrible idea. If you think GM's management is bad now, just wait till Congress is in charge. Any company run by a group of people with no personal investment at stake and tons of external political pressure is doomed for failure.

I also completely disagree that government is any better at anticipating future needs. Markets have considerably more information with which to make those sorts of decisions and better incentives for investing in new ideas that will actually work. When Congress decided we needed alternative fuels, they put the brunt of their resources into corn-based ethonol, which we now know yields less energy than is required to create it. Government does not have a good track record with picking the winners.

Additionally, Neil claims Japanese and European manufacturers are "quasi-national" because of the government's role in healthcare and retirement costs. Fair enough. But isn't that an argument for universal healthcare and a stronger social safety net?

I'm a big proponent of people sticking to what they're good at. Congress is good at bloviation, not running corporations.