I'm Not Liking Moore's Advice

By BJ Bjornson

I read Michael Moore�s goodbye to GM this morning. In it, he makes a number of suggestions of what he�d like to see happen to the company now that the US government happens to be the majority shareholder. In doing so, he manages to solidify my feeling that government ownership of such a company is a really bad idea.

On the surface, most of Moore�s suggestions aren�t anything too radical; take over the in-place industrial infrastructure to build more efficient and more reliable vehicles, switch to mass transit production, build renewable energy components. All decent suggestions for any car company faced with considerable over-capacity and the need to either convert a number of factories or shut them down. However, the problems with this model become quite apparent when you look into the details.

The reason Moore wants those GM factories to move over to trains and light rail production is because he also expects the government to start building and mandating more or new high speed rail and metropolitan transit systems. Always a sweet deal when you can mandate your own market, isn�t it? I can see the potential for abuse and waste on such a program from thousands of miles away. While there is no question there are several areas in the US that could benefit from high speed rail links, that number is by no means infinite. However, if you happen to be in charge of a company building high-speed rail components, as well as being in charge of determining and mandating where such lines should be built and expanded, how long do you think it will be before you start deciding high speed rail lines need to be just about everywhere? You think pork in Congress was bad before?

And how about the light rail transit systems? I�m admittedly not a municipal planning expert, but what I do know is that such systems are only really cost-effective in cities and areas of a certain population density, a density many American cities lack in their suburbs and exurbs thanks to the very car culture Moore is looking to kill. Start mandating such systems to ensure markets for your products and I�m sure they�ll spring up all over the place in areas that can�t really support them, causing more waste than savings.

And Moore�s idea of energy efficient buses for rural areas? If rural means those exurbs mentioned above, then maybe, but if it means the areas I grew up in on the western prairies, the idea is too ludicrous to even contemplate a response. Buses by their very nature are only efficient when transporting large numbers of people. The very definition of rural is such that it means there aren�t going to be large numbers of people to transport places.

The above scenarios are only part of the problem with his ideas. The other is the fact that we�re not exactly talking about a competitive marketplace here. It is one thing for the government to mandate or subsidize rail and transit projects and allow the projects to go out for competitive bidding and quite another to create such projects for a solitary provider its going to use partly because it happens to control it as well and because it pushed for the manufacture of such components from said supplier in the first place. After all, there�s nothing like a captive, guaranteed market to make a company strive for the greatest efficiency and service, is there?

There are only a very few areas where strict government control and/or government-run corporations make sense, and those are mostly in areas where natural monopolies are the norm. Power, water, and other utilities, as well as transportation networks require government influence to ensure fairness. If you could force any and everyone who wanted to provide power at competitive rates to build their own distribution systems, the costs of entering the market would be far too high to allow competition. Same goes for telephones and internet connections, particularly for landlines, but also if companies could refuse to carry other companies� calls and network traffic.

Vehicles don�t fall into that category. I have no problem with the government mandating things like required safety systems, maximum and minimum sizes and weights for vehicle classes, mileage and emissions standards, and so forth. It would be impossible to design a transportation network without some kind of standards, and public safety and health is rightly a government responsibility.

Letting multiple companies take those basic standards and build various models to try to better appeal to people provides for the kind of healthy competition that promotes quality and efficiency, all other things being equal. (Foreign companies who don�t have to worry about health benefits for their workers have a distinct advantage here, obviously. Same goes for plants in areas of the world where the surrounding public�s health doesn�t come in for very much concern. The latter is one area where tariffs make sense as an equalizer.) GM and Chrysler weren�t exactly doing a very good job on this end, and I can�t imagine that forcing them build cars based solely upon certain political considerations is going to be any more likely to result in cars people want to buy.

Same goes for the solar panels and windmills. Government funding for R&D and subsidies sound good, as well as regulations or investment to make sure transmission lines are upgraded to handle such power, but the building of small-scale components like panels and windmills really isn�t the government�s business.

I'm all with Moore on how bad an idea gutting America's industrial infrastructure is, and certainly laying off even more workers in a period of economic doldrums isn't going to help the recovery. I'm even with him on looking for alternative uses for the car factories.

There is clearly an overcapacity in car production right now, and I'm not to sure that letting at least one of these behemoths go down might not have been the best choice. The experts keep saying that car sales have to recover, but this post by Matt Yglesias makes clear that Americans are much higher on the car per capita scale than similar countries like Canada, meaning there is considerable room for contraction yet.

Under such circumstances, not only are the plants slated for closing now sure to stay shut so far as car production is concerned, but they won't be last. If the government can find ways to attract alternative manufacturing companies to move in and take these shuttered assets off its hands, so much the better.

But it has to be somebody taking it off the government's hands. Already, Congress is looking to influence how the business decisions are going to be made. There just isn't any way I can see this not ending in disaster unless the government does as Obama says and gets right back out of the car business as soon as humanly possible.