The Economist - An apology is due to Barack Obama

Discussion in 'Economy' started by Shogun, Aug 25, 2010.

  1. Shogun
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    Government Motors no more
    An apology is due to Barack Obama: his takeover of GM could have gone horribly wrong, but it has not

    AMERICANS expect much from their president, but they do not think he should run car companies. Fortunately, Barack Obama agrees. This week the American government moved closer to getting rid of its stake in General Motors (GM) when the recently ex-bankrupt firm filed to offer its shares once more to the public (see article). Once a symbol of American prosperity, GM collapsed into the government’s arms last summer. Years of poor management and grabby unions had left it in wretched shape. Efforts to reform came too late. When the recession hit, demand for cars plummeted. GM was on the verge of running out of cash when Uncle Sam intervened, throwing the firm a lifeline of $50 billion in exchange for 61% of its shares.

    Yet the doomsayers were wrong. Unlike, say, France’s President Nicolas Sarkozy, who used public funds to support Renault and Peugeot-CitroĂ«n on condition that they did not close factories in France, Mr Obama has been tough from the start. GM had to promise to slim down dramatically—cutting jobs, shuttering factories and shedding brands—to win its lifeline. The firm was forced to declare bankruptcy. Shareholders were wiped out. Top managers were swept aside. Unions did win some special favours: when Chrysler was divided among its creditors, for example, a union health fund did far better than secured bondholders whose claims should have been senior. Congress has put pressure on GM to build new models in America rather than Asia, and to keep open dealerships in certain electoral districts. But by and large Mr Obama has not used his stakes in GM and Chrysler for political ends. On the contrary, his goal has been to restore both firms to health and then get out as quickly as possible. GM is now profitable again and Chrysler, managed by Fiat, is making progress. Taxpayers might even turn a profit when GM is sold.

    That does not mean, however, that bail-outs are always or often justified. Straightforward bankruptcy is usually the most efficient way to allow floundering firms to restructure or fail. The state should step in only when a firm’s collapse poses a systemic risk. Propping up the financial system in 2008 clearly qualified. Saving GM was a harder call, but, with the benefit of hindsight, the right one. The lesson for governments is that for a bail-out to work, it must be brutal and temporary. The lesson for American voters is that their president, for all his flaws, has no desire to own the commanding heights of industry. A gambler, yes. An interventionist, yes. A socialist, no.

    General Motors: Government Motors no more | The Economist


    :lol:

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  2. Shogun
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    awww... DID I HURT YOUR FUCKING CAPITALISTA FEELINGS?
     
  3. Sheldon
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    Sheldon Senior Member

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    The Economist is one of the best magazines out there, as far as politics goes. Good article, they nailed it again. :thup:
     
  4. Oddball
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    What, that he got lucky means he's due an apology?

    I don't think so...Homey don't play that.
     
  5. Modbert
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    Modbert Daydream Believer Supporting Member

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    :lol: lucky. Is that what you want to call it?

    Would it pain you that badly to admit he did something right?
     
  6. Shogun
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    uh huh...


    :rolleyes:


    :lol:
     
  7. Woyzeck
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    Woyzeck Senior Member

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    So, if it didn't work, you'd be saying "Well, it doesn't mean much about the guys abilities as a leader, he just got unlucky," right?
     
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  8. Oddball
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    Oddball BANNED Supporting Member

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    They're nowhere near out of the woods yet.

    That garbage about the money that they allegedly "paid back" was nothing more than a shell game lie.
     
  9. Oddball
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    He did nothing right.

    He got lucky that GM turned around despite his meddling.

    Ford took nothing and has done even better, so it's at least arguable, using your logic, that the takeover has been a drag on their recovery.
     
  10. Shogun
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    yea.. Who is THE ECONOMIST compared to the musings of an Oddball?

    :rofl:
     

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