Friday, November 7, 2008

The Coyote on why GM should be allowed to crash and burn

Noting that Nancy Pelosi has already signaled a Congressional commitment to coming across with another $25 Billion for Detroit's ailing Big Three, Coyote succinctly makes the case for simply allowing a failing business ... to fail:

So what if GM dies? Letting the GM's of the world die is one of the best possible things we can do for our economy and the wealth of our nation. Assuming GM's DNA has a less than one multiplier, then releasing GM's assets from GM's control actually increases value. Talented engineers, after some admittedly painful personal dislocation, find jobs designing things people want and value. Their output has more value, which in the long run helps everyone, including themselves.

The alternative to not letting GM die is, well, Europe (and Japan). A LOT of Europe's productive assets are locked up in a few very large corporations with close ties to the state which are not allowed to fail, which are subsidized, protected from competition, etc. In conjunction with European laws that limit labor mobility, protecting corporate dinosaurs has locked all of Europe's most productive human and physical assets into organizations with DNA multipliers less than one.

The State in its current incarnation is only capable of envisioning large industries as providers of wages and benefits to workers. The danger in this is the failure to see structural limitations to innovation that might actually ... make things better for more people. We now live in a State driven by fear rather than optimism.

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