Yes the time has come to talk of final things, and no I don't mean the end of the Mayan Calendar. I'm talking about Nationalizing Chrysler.
According to Nouriel Roubini's Global Economic Monitor, the Democratic Congressional plan to save the Big 3 would "Allow automakers to tap $25 billion under the $700 billion TARP program as a 7-10 year loan at 5-9% interest rate. Loans will be conditional upon placing restrictions on bonuses, executive-compensation, golden parachutes, improving fuel efficiency with rigorous independent oversight and changes in the management. Goverment would get stock warrants and no stock dividends would be paid during the loan period.
While one hopes the Democratic Congressional Auto rescue plan gets passed soon, the truth, as we all know, is that it will solve neither the obvious nor underlying economic problems of the auto industry. For that, we're going to need a more fundamental approach.
The Democratic Congressional proposal should be broadened to allow a government bailout of both GM and Ford that sees the US Treasury permanently assuming the health care and "Legacy" costs of the two companies. In exchange, we the people will receive a minority equity --and voting-- stake in the companies, as well as significant public and union representation on their Boards.
Chrysler meanwhile, would be bought from Cerberus Capital Management-- immediately. As it happens, Cerberus is, at this writing, desperately trying to unload Chrysler, which they bought for almost nothing from the German Auto Company, Daimler in the summer of 2007. For Daimler, the key part of that deal was getting someone to take on Chrysler's legacy costs. The US Treasury can now return the favor and save Chrysler from being completely run into the ground by Cerberus, which was woefully miscast as an auto holding company in the first place.
The new company could be renamed "US/Chrysler," and in the course of a year or two transformed into a dedicated green car company whose chief line would be a new, stripped down, low cost (ie., compact, GPS less, no Satellite radio) hybrid. The car would go for approximately seven to eight thousand dollars. Low cost auto loans to make the car affordable for every American family could be financed through a new US/Chrysler Bank.
The point of the car would be, first, to make cheap hybrids that got 100 miles to the gallon ubiquitous in America. Second, the existence of such a vehicle should scare GM and Ford into coming up with something that could compete. Third, the transformation of the US auto industry would either rout the Japanese, German and Korean Car companies or force them to come up with something even greener.
What we're talking about is no longer a race to the bottom, but a race to the top.
Of course that's not going to please everybody.
There has been a laissez-faire argument advanced on the Right over the past several weeks about the power of "creative destruction" in Capitalism. Through this prism, the free market is seen as an elemental force of nature that cannot, nor should not, be dammed up.
Briefly, this argument is a steaming pile of shit. Creative Destruction may work in the early phases of Capitalism, as part of the bloody business of primitive (Capital) accumulation, but in Late Capitalism, "creative destruction" is a euphemism for "race to the bottom."
What "creative destruction" really means for the neo-liberals and neo-cons who advance it, is that Detroit must be allowed to fail because it's no longer viable. But have no fear they tell us. Through bankruptcy, GM for one, can dump its outdated labor contracts; restructure its labor costs, close unprofitable plants, and drop their onerous pensions and health care plans.
These economies will then supposedly make post-bankruptcy Detroit competitive again in world markets against leaner, meaner Japanese, and Korean companies that don't have Detroit's legacy or union labor costs hanging like a millstone around their necks.
This argument of course conveniently forgets that it was not the "free market" that created what we call the American Way of life. What created the post War economic boom that characterized "the American Century" was an Industrial working class that was paid well enough, for the first time in history, to actually consume the products they were producing.
The creative destruction argument also conveniently skirts the ethical and moral issues raised by cutting people's pensions, retirement benefits and health care after they have spent their lives working, in good faith, to accrue them. If this is the kind of good faith that "free market capitalism" now represents, then nobody should get too upset if and when a dispossessed working class decides that maybe potential future capitalists should be thrown into the river at birth.
Finally, it was the abandonment of American manufacturing in the 70's that led directly to the rise of the Financial Service economy in the 80's. The finance economy of the last twenty-five years created enormous new pools of wealth for the US and the world, but was based on consumer and leveraged corporate debt rather than actually making things. Surprising nearly everyone, this enormous slagheap of debt-- rising up by the side of the glittering new pools of financial wealth-- turned out to be more than just an aesthetic problem. Now the man made mountain of toxic debt has collapsed and it's going take us a long time to dig out from under it.
However, as is often the case in life, the way of out of this crisis is precisely the same as the way in. It's time to put our collective national creativity to work, not by destroying the last vestige of our industrial base, but-- by all means necessary-- beginning to make American manufacturing viable again.