Monday, August 9, 2010

Macbeth Weds Romeo and Juliet

I've written about the GM takeover debacle in the past, but this Pajama's article today prompted me to post a response there:

One of the worst things done in the GM takeover that no one has commented on adequately or even at all -- the debtholders were subordinated to the employee unions.  That sounds innocuous, but consider that all of capitalism depends on the sanctity of contract law.  At the whim of Lord Obama (evil twin to Lord Voldemort, who is, by comparison, a relatively clean person), GM's debt contracts (bonds) were nullified. 

There was no legal basis for this.  And out of abject fear, none of the debtholders contested it in court... Why?  Because the commandment came from our absolute ruler in the White House.  You can't speak against the edicts of the God in Chief, can you? 

Out of stupidly abject shortsighted greed, the shareholders didn't object, of course, because they were facing 10 cents on the dollar for their stock if GM went bankrupt, and they were calling in every political marker they could to get the government to buy out the company and save their sorry asses.

There was not a single principled action by anyone concerned.  So goes the decline of freedom in this world.

The consequences if GM had gone belly up? 

1.) Stupid investors who believed GM a safe bet would have been out a lot of money.  (Read Atlas Shrugged, and pay special attention to the run on d'Anconia stock.) I don't call this a bad thing.  I call it justice.  The other concept destroyed in this pathetic melodrama, besides "rule of law", "property rights" and "capitalism".

2.) The union contracts would have been nullified (Obama would have lost a lot of supporters), and autoworkers would have been forced to work at a competitive wage -- or get another line of work. 

3.) The plants and equipment would have been sold off to more efficient manufacturers.  Capital would have been more efficiently allocated.

No one would have died. The world would have gone on.  But GM would have ceased to exist as a corporate entity -- a collection of legal documents and a management hierarchy.  The productive engineers, managers and laborers would simply have gone into more efficient businesses. The physical buildings would have remained standing, waiting for someone else to occupy them.

The biggest change for everyone not affiliated with the company:  the GM brand would have disappeared.  A name.  A long-dead rose and nothing more.

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