Sunday, May 11, 2014

Rent-Seeking Gone Wild: Chrysler’s Phony Recovery And The Delusions Of Its Bubble Merchant CEO

David Stockman reports on the greedy rent-seeking and looting of federal tax payers:
The truth is that the auto bailouts did not save or create a single new auto job. As I demonstrated in the

Great Deformation, they just shifted 25,000-50,000 assembly plant and supplier jobs from south of the Mason-Dixon Line to the rust belt in Ohio, Michigan, Wisconsin and Illinois. That is, the North American and global auto industries were drowning in excess capacity on the eve of the crisis, and the only question was whether consumer demand for new cars would be satisfied by the efficient foreign transplant suppliers located in Alabama or high-cost, long-in-the-tooth UAW dominated plants in the north.

Thus, the political decision of the Bush and Obama Administrations to allocate auto jobs based on electoral politics and crony capitalist coddling of the UAW and the Chrysler/GM business complexes did not add a dollar to GDP; it just reshuffled the given level of consumer spending on new cars among regions. And the ultimate result is that the free market was blocked from doing its job of liquidating excess investment and uncompetitive suppliers and plants. In short, true national wealth was reduced by the auto bailouts.

Yet the damage goes beyond dollars and cents. The bailouts have also enabled the rise of a whole generation of soap-salesmen CEOs who tout miracle “recovery” stories, thereby reinforcing the “all fixed” meme. Fiat-Chrysler is a standout case of the latter, and its CEO, Sergio Marchionne, is a bubble illusion merchant of the first rank.
One of the biggest heists in American history.