"Obama understands that the market doesn't always work on its own"
Whenever I'm on the internet, there are a lot of sites that I regularly check for information on news, sports, business, etc. Over the last few months the number of articles and comments on politics has ramped up to a degree that I have never seen before. Most of the articles are well-written and are entertaining to read. Each one has its own spin on the facts trying to persuade readers one way or the other, while most of the comments about the article have the appearance of being written by a 10-year old and trying to accomplish the same thing.
Apparently this election cycle and the politically-motivated content available has been successful in getting me to think about politics and what I believe to be the right direction for our country. An article posted on The New Republic called "Why the GM Rescue Should Matter in Ohio--and Everywhere Else" generated a lot of buzz on a site I visit, so I decided to give it a read. As usual, the content was quality--right up until the last paragraph or two.
Two paragraphs near the beginning of the article read:
The American automakers were in trouble long before Chrysler and GM came to Washington in late 2008, seeking emergency assistance. Once models of American efficiency and emblems of American industrial power, the companies had struggled to keep up with foreign competitors. Unburdened by the same union contracts and obligation to provide health benefits, and guided by more imaginative leadership, these foreign competitors paid lower compensation and built better cars. By the 1980s, all three American carmakers, including Ford, were losing market share. It was only a matter of time before they were losing money.
Ford was the first to take matters into its own hands, largely because it ran into trouble first. In the 1990s, while the economy was strong, it began reinventing itself as a leaner, stronger firm. Chrysler and GM were slower to react. By 2008, they were building better, more appealing cars than they had been. But they hadn’t restructured their operations as fully as Ford had: They hadn’t reduced capacity to match their diminished market share. They hadn’t fully renegotiated agreements with labor and suppliers to keep up with the competition. They bled money and, once the economy collapsed, they simply couldn’t pay their bills. That's when they came to Washington, begging for help.
And then, in one of the concluding paragraphs, Jonathan Cohn writes, "Obama understands that the market doesn't always work on its own--that sometimes government must intervene in order to protect Americans from economic harm."
Obama's actions most definitely prevented Americans from economic harm. If he hadn't made some of the decisions that he made, Americans would have lost their jobs, companies may have gone under, and cities and states may be in much worse states than they are currently in. But do not say that the markets didn't work. In fact, there are two reasons why that is false:
- The markets weren't given a chance.
- The markets did work.
Mr. Cohn (in the paragraphs quoted) mentions that Americans auto makers were "unburdened by the same union contracts and obligation to provide health care benefits" as their foreign competitors. Labor contracts and obligations to provide benefits are not market forces--it is outside manipulation that doesn't allow the market to act as it normally would. Regulation and law that requires companies to act in certain ways diminishes from the effectiveness of the free market system.
More importantly, the markets did work. Within the free market system, individuals and companies have the opportunity to build something great and be compensated for it (which is apparently what Mr. Cohn sees as the market "working"). Inherent in that is the chance that individuals and companies will also fail, which is also the free market working. Companies must keep up with the competition or risk going under. By his own admission, Mr. Cohn says that Chrysler and GM were slow to react to foreign competition. The market says let them fail. Our system worked exactly as it was designed to. It was the actions of President Obama who prevented it from happening.
The bailouts of American auto companies undoubtedly saved jobs, but at what cost? Regulations and bailouts prevent our system from correcting itself. If Mr. Cohn wants the markets to work, he should first understand what happens when a market works, and then push for the removal of anything that would prevent it from being successful.