United States Government Refuses to Accept Free Market Solution

I just heard a spokesman from General Motors on a radio show say that he was grateful for the government stepping in to save the company. He outlined why he felt that way and his explanation for why he is appreciative of government intervention is precisely why I believe that the company should have failed.

According to the spokesman, General Motors’ bankruptcy process allows the company to shed its bad assets and sell the viable assets to a new company. The new company will be the new General Motors that will consist of Chevrolet, Cadillac, Buick and GMC. During the process, Hummer, Saab and Saturn will be put up for sale while Pontiac will be shut down completely. Saturn has already been purchased.

It was necessary for the government to be involved, according to the spokesman, because if General Motors had filed for bankruptcy without assurance that the government would purchase at least a major part of the viable assets, then there would very likely have been no one to buy the viable assets. At the very least, there would have been no single venture capitalist, hedge fund or other capital entity that would have taken a chance on the new General Motors. The government was the only option.

What the spokesman explained was the process of the free market shedding weaknesses. If General Motors files for bankruptcy and there is no one willing to purchase its assets, then the market has dictated that the company is a failure and that none of the assets were actually viable. The market should have been left to do its work instead of the government stepping in and keeping a failed company on life support. Capital invested in General Motors should have been liquidated so that it could be reinvested into stronger companies. That is how capitalism perpetuates.

Honestly, I find it difficult to believe that some financier would not have taken a chance on Chevrolet or Cadillac, and likely even GMC or Buick, because they are distinctly American brands that likely could be restructured into lean and efficient automobile brands. Bondholders, shareholders, the unions and whoever else that owned the “old” General Motors certainly would have negotiated and accepted a reasonable offer from someone willing to step in.

But, if no one was willing to purchase any of the apparently viable assets, then the company should have been left to die. Instead, the government defied the free market and did not allow its mechanisms to take their toll. Failure is inherent in capitalism, but in no other system can success run so rampant.

The governments’ actions show that our political leaders do not have the faith in the free market that is necessary. If they did, General Motors would be on its own to push through the bankruptcy process. Not only does government intervention show a lack of faith the free market but it shows that the government has too much faith in itself, believing that intervention was best for the country. A faith in government that runs that deep is contrary to the American Way. What has happened to our country?