Tuesday, November 11, 2008

As Goes GM.....

It is pretty much a consensus at this point that General Motors "must" be saved. Letting them fail would cost hundreds of thousands of jobs in countless industries across the country. Of course we can't have that right? Wrong.

GM is failing right now because it is a bad business. It has overpaid employees and terrible management. What would correct that? Bankruptcy.

The government sending them money every year is just propping up a terrible business model. If they were allowed to fail, it would initially cost hundreds of thousands of jobs, yes. I agree. But what would happen then?

GM would still have assets that would be bought by a new investor. That new investor then would come in and design a better business model for the company with better management without ridiculous pensions, labor costs, ect. The people would then have work again, it would just be at a much lower pay. If they don't like the pay, they can go work for someone else. Why should we pay for their salaries? We already pay everyone in Washington's ridiculous salaries.

Here is the most important part: The money that would be wasted on keeping GM artificially propped up could then be used for real productive good. (Think China below)

No one ever thinks about that though, they only think about the immediate impact they see in the jobs losses. You have to be able to see two steps down the road from a decision. If our government cannot do that then we will continue to fail as a nation.

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