Following yesterday’s impressive news from Ford Motor Company of their $1 billion profit in the third quarter, one may have wondered how the two government run American automakers fared by comparison. The answer was not long in coming, as following immediately on the heels of Ford’s news was a very dire report that GM, Chrysler are struggling mightily, and that their eventual demise was very likely only briefly delayed by the government’s intervention including the wasting of $75 billion of the American taxpayers’ money.
Analysts quoted for the story agreed that both companies are far from profitability, are still at great risk of failure and are likely to need at least one if not multiple additional rounds of federal bailout funds in order to overcome their current predicament. Of course, the problem with this is the federal government has no money to invest, already owns a large percentage of these “dead” companies and would simply be throwing good money (taxpayer money) after bad.
In slightly more than 24 hours we have been reminded of the lesson we long since should have learned from watching the second half of the 20th century. Capitalism works; Socialism, Stateism, Fascism fail. For those who are slow learners, this lesson will continue to play out for years to come in the quarterly reports of Ford versus GM and Chrysler, of Geico versus AIG, of J.P. Morgan Chase versus Citigroup and on and on. if someone out there is still not convinced perhaps a review of the performance of Amtrak, the U.S. Postal Service or the Department of Education would clarify things for them. Despite monopolies in both passenger train service and mail service, the federal government can’t profitably run Amtrak or the post office! And since the federalization of the American education system our world ranking has declined at a statistical rate that borders on impossible.
The government has never, can’t now, nor will ever be able to successfully run anything. The sooner the American people get this fact through their collective heads, the sooner priorities can be adjusted to getting government out of the way of business resulting in the best environment for the potential prosperity of the greatest number of Americans.
Today, Ford Motor Company reported a 3rd quarter profit of $1 billion, stunning socialists everywhere, mainly Washington Democrats, and in the process demonstrating for all those who may have forgotten that, surprise, surprise, capitalism still works. Having initially gone to Washington with its big three cohorts, GM and Chrysler, to seek a government bailout in light of the economic collapse; Ford quickly realized what all good capitalists know, that allowing Congress and the president to take ownership of their company would be the end of Ford as a productive entity. Withdrawing from the bailout process, Ford’s management team continued implementation of the turn-around strategy they had begun in 2005. It would appear they have gotten it right.
Meanwhile, down the road at GM and Chrysler Obama was firing CEOs (something he had absolutely no authority to do), shareholders were being diluted on a massive scale, unions were being forced to take huge pay cuts and the companies are being forced to sell off assets such as Hummer, Fiat and Saturn. Yet, with all that, profitability is nowhere in sight – not this quarter, not next year, perhaps never. Instead, billions of American citizens’ hard-earned dollars are being poured down the drain to save what in reality may not be savable.
That’s how capitalism works; it isn’t pretty and not everyone gets a gold star on their quarterly earnings or a ribbon just for participating. Some companies succeed and some fail. Often the failed companies come back following bankruptcy, or they are acquired by their competitors. In some cases they simply cease to exist. The beauty of the free market is that this only happens if the market has determined that the company is worthless and beyond saving.
Too bad Congress and the President don’t seem to understand these simple laws of economics – laws they should have learned in Econ 101. Instead, like a parent who tries to protect their child from every potential harm only to end up creating weak adults unsuited to the competitive real world (see Generation Y), the government continues to bail out businesses and in some cases whole industries resulting in weaker American companies and a weaker American economy overall. Imagine what might happen if they would only get out of the way. Perhaps the car companies in America would be more like Nissan and Toyota – highly competitive, tremendous market-leading products year after year, well-paid workforces and most importantly of all, consistently profitable and never having asked for one penny of taxpayer money!