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Market forces at work

Market forces at work

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Wacko
GM needs another $5billion if they're going to survive.

http://www.dailytech.com/article.aspx?newsid=14270

Now, I'm not an economics expert, but isn't this just market forces at work? If there's dropping demand for what GM is selling, then how will more money help?

For a country that prides itself on being Capitalist and a free market economy, America does a fair bit of subsidizing of items that cannot compete in a free market.
  • The problem is that letting it fail not only kills the company, but also some ridiculous number of employees. And because they're capitalist pigs, they feel that propping up the company until it succeeds is somehow better than propping up the individual employees until they can find something else.
  • Yeah I thought about that. The problem is who's to say GM won't have the same problem once they burn through the extra money? The assumption there is that GM will eventually succeed.

    But I agree that that many newly unemployed would be bad.
  • The bailout plans so far seem to be on the order of US50k -- US100k PER WORKER at GM (not just US workers -- the worldwide base of ~250k employees).

    It strikes me that once you factor in the healthy percentage of those workers who probably could migrate to employment in the same, or a different industry following a collapse of GM, you have a pretty decent fund left for supporting and retraining the rest of them.

    It seems to me that there are two questions in play: (1) do you "bail them out" in some sense and (2) assuming you do, how is the money spent?

    The "people will suffer" argument gets in behind (1) nicely, but I'd like to see something a bit more effective than "you guys should, um, build compact hybrids instead of SUVs" in terms of efforts to repurpose a GM that should really be regarded as partly renationalised after that much public money goes into it.

    Can GM survive and be economically viable in ANY sense as a car manufacturer? Data seems unconvincing right now :-)

    • I think the first assumption is that GM can survive and become viable, and I personally think that's reasonable. It's possible the american car plants _can't_ become viable, but the company as a whole - they can.

      Nationalising is an interesting idea - i'm not sure how well it works in the context of a multinational company that probably owns dozens of foreign companies... I quite like the idea of nationalising then re-privatising them, since it's a reasonably effective punishment of the dicks in charge of the company ;)

      I actually don't believe in propping up ailing industries that are not somehow essential to society. The market for cars will happily be filled by the japanese and the europeans, all those american GM workers could go and do something else. Of course - with a largeish unemployment problem at the moment, maybe the aim is simply to keep them off the streets, and try and keep the crime rate from spiking.
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