I find it ironic when self-proclaimed anti-corporate-greed liberals support costly government subsidies of greedy big businesses.
[Note: Although that also goes for many self-proclaimed anti-big-government conservatives, I must pick primarily on the liberals in this article, to keep this series fair and balanced. This article is Stubborn Irony L3: Pro-corporate-greed Liberalism, the first of 3 in this week’s portion of my nonpartisan “Ironies” series—a diverse array of criticisms, distributed evenly and fairly among an inclusive list of ideologies: liberal, conservative, and nondenominational, to achieve my Diversity and Inclusion goals for 2007.]
Podcaster Barack Obama gave a speech on energy policy a few months ago. Because he seems likely to be involved in the 2008 presidential campaign, last month I decided I’d better listen to what he had to say about energy. Obama appears to have the support of a growing throng of liberals—most of whom are not bashful about voicing their blanket disdain, even hatred, of anything “corporate.” 
After all, they say, “corporations” are greedy, heartless, rapacious, insensitive juggernauts, skillfully hypnotizing and suppressing the innocent, powerless masses into enriching the predominantly white male fat cat executives, who always evoke mental images of Jabba the Hutt. [Liberal politicians have always been skillful at exploiting that one-dimensional caricature indelibly burned into the minds of their liberal constituents—let’s face it, successful politicians know how to “solidify the base.”]
But Obama’s speech on energy policy, frequently interrupted with cheers by his admiring audience in the podcast, repeated the same theme summarized at his website:
Noting the importance of keeping the American auto industry strong while also reducing oil use in the United States, Obama called for using government money to relieve Detroit automakers of some of their staggering health care obligations if they commit to improving fuel economy by 3 percent a year for 15 years.
In other words, the liberals’ real stance apparently is: Corporate fat cats are hatefully greedy, but—in the liberals' pet industries and technologies—we shouldn't let them suffer the consequences of their greed.
My question: Why not? In fact, why not speed up the consequences?
William W. Lewis explained the situation in his book, The Power of Productivity:
Businesspeople spend considerable efforts trying to find [high-profit] market segments with little or no competition . . . [but] unusually high profits attract competitors. Prices fall . . . volume goes up. The consumer ends up with most of the economic value created . . .
The problem is that unproductive businesses want protection from productive businesses. We should not blame them. That's human nature. We should just prevent them from having their way. . . . Unproductive businesses go to great lengths to get protection. They lobby, bribe, gather votes for, and promise jobs to government officials. They also hide their special interests underneath noble-sounding social objectives whenever they can.
George Gilder’s summary of greed was more general:
Greed is an appetite for unneeded and unearned wealth and power. The truly greedy seek comfort and security first. They seek goods and clout they have not earned. Because the best and safest way to gain unearned pay is to get the state to take it from others, greed leads, as by an invisible hand, toward ever more government action - to socialism, not capitalism.
Obama’s fat-cat bailout proposal is reminiscent of an equally bad idea from a quarter-century ago: the Chrysler bailout by the federal government. The “logic” back then should sound familiar: it was dripping with emotional appeal, on several levels, sufficient to win the hearts of our legislators. Here’s a summary of Chrysler’s argument to Congress for the federal bailout, circa 1980:
• Chrysler's problems are the government's fault;
• Chrysler employs thousands of workers;
• The government has helped other corporations; now it's Chrylser’s turn.
[In order, for students of critical thinking and logical fallacies:
• deflecting blame;
• sob story;
• social proof.]
The Heritage Foundation posted a good post-mortem on the Chrysler bailout. Here’s a summary:
When the loan guarantee program was being considered by Congress, Chrysler's unions and top management constituted the visible constituency, pleading its case in Washington and begging to be pulled back from the jaws of bankruptcy. Unheard was a huge invisible constituency. They included unrepresented and current and future laid-off Ford and General Motors workers, who never understood that their tax dollars were being used to destroy their own jobs in order to save jobs at Chrysler.
In other words, those car-making jobs at Chrysler wouldn’t have vanished if government hadn’t intervened; they would have shifted to more-competent companies. Today we would no doubt have better cars, higher-paying jobs, and a higher proportion of cars made in North America—at Ford, GM, and Toyota factories. But no; we fell for the sob story.
Think of Obama's proposal this way: If it’s a good idea to dole out government money to subsidize their favorite, currently-visible technologies—currently provided by today’s entrenched corporations—then why isn’t it a better idea to encourage yet-to-be-developed technologies, at least one of which will turn out to be the big winner, and will be provided by hungry, lean-and-mean entrepreneurs, managers, and more effective corporations? In fact, why isn’t the latter a better idea? Why do liberals keep thinking that, just because something better hasn’t been discovered or developed yet, we cannot count on it ever happening, and that we therefore need to subsidize today’s entrenched fat cats?
Where are Obama’s (or other liberals') ideas for subsidizing the new, mostly small companies who are trying to render the internal combustion engine obsolete? Why is it a good idea to place those upstart innovators at an immediate competitive disadvantage by subsidizing the tweaking of currently-visible technologies—just because Capitol Hill liberals can’t trust that a new technology will change the paradigm if the proper incentives are in place? [I've already studied different ways the government could speed up the development of necessary new technologies, and I've come to the objective conclusion that my expansion of Paul Romer's idea—I call it the 21st-Century G.I. Bill—is the best one out there so far. Your opinion may differ.]
In any case, the new G.I. Bill is a lot better idea than Obama’s proposed fat-cat bailout boondoggle, which would place the following fledgling experiments, and their sponsoring companies and employees, at an even bigger competitive disadvantage:
• the hyper-capacitor car;
• the regenerative fuel-cell;
• the alternative super-battery.
That’s not an exhaustive list by any means. After all, “innovation” by definition is impossible to predict. What’s necessary is faith that innovation will emerge, given sufficient incentives fostering a vast array of independent experiments. What’s detrimental is federal subsidy of entrenched-technology-tweaking, and of the corporations that will do the tweaking.
Obama feeds Jabba. I find that extremely ironic.
Obama is not favoring the automaker fatcats. He is favoring the UAW rank and file and their unsustainable legacy costs. That's his base as a democrat in Illinois (with heavy influence from the Chicago machine).
Whether or not he considered if those unsustainable costs could lead to the demise of the US auto industry I cannot say. However, he may want to consider the Panodora box he has opened....the legions of corporations that will come to him looking for a similar gift.
Nevertheless, while this idea is boneheaded at best (and the Dems call Bush incompetent?) what is scary to me is that a junior Senator with no track record AT ALL is getting this much attention
as a possible president.
God help us save the nation.
Posted by: Bob | 17 January 2007 at 07:57
Milton Friedman called the situation "The Suicidal Impulses of the Business Community" (a title of lectures he had done) in his interview with Russ Roberts on EconTalk. A particular business will push government to act in that business's interests to restrain its competitors. It may be wrapped in the noble purpose of giving healthcare to workers or saving jobs, but this is a push away from free markets.
Posted by: Jim | 17 January 2007 at 08:29