General Motors’ plans to close plants in Ohio and Canada, and to eliminate up to 14,000 jobs in the process, was a hard blow to each one of the affected GM workers, their union leaders, the communities sustained partly by the plants, and to highly visible politicians who will be held accountable for the outcome, whether they deserve to be or not.
President Trump was especially critical of the GM plan, venting with an even-less filtered version of his wrath than we are used to hearing, when he spoke with GM CEO Mary Barra about the far-reaching decision.
Trump recounted, “I told them, ‘You are playing around with the wrong person.’” After all, Trump had promised Ohio workers on the campaign trail that, if elected, he would bring jobs back to their community, and that they should hold on to their homes because better things were on the way.
Meanwhile, Barra indicated that the hard decision was a necessary one, and, “This is what we’re doing to transform the company.” She also pointed out that the products produced in the affected plants were no longer viable in the marketplace.
Barra, it can be argued, was attempting to increase shareholder value. But as a highly visible, publicly held company with almost endless intertwining connections with the U.S. and other governments, GM is not in a position simply to make and quietly carry out what might be called a profit-maximizing decision.
[Opinion: General Motors factory closures could hurt Trump in 2020]
Put another way, the firm’s stakeholders are vast and endless. Having been bailed out by the federal government a decade ago, assisted by limits on Japanese imports before that, burdened by some regulations and lifted by others, and taxed heavily and then lightly, the firm is not a pure example of American free enterprise. Indeed, large firms as examples of economic purity are as rare as hens’ teeth.
Still, it’s not reasonable to expect GM or any other firm to play a losing game longer than circumstances would otherwise dictate just because of a recent cut in corporate taxes. Nor should we expect that a firm saved from bankruptcy by public action, which satisfied the conditions of that action, be called on later to pay up for having been saved. Business is still business.
It is still the case that GM and all other firms must seek to survive in a competitive political economy where private firms, public entities, and countless special interest groups struggle and strive for their place in the world. Both Barra, in justifying her decision, and Trump, in opposing it, have a logical basis for their positions.
If GM is to employ U.S. workers in greater future numbers, the firm must find ways to produce products people will buy and to make a profit while doing so. If Trump, his supporters, and taxpayers are to succeed in their efforts, they too must provide an institutional environment where privately held firms and taxpayers can both flourish.
In short, General Motors and President Trump find themselves unavoidably playing in a bureaucratic, highly regulated briar patch where only the most gifted political economy practitioners survive and flourish. Those who yearn for simpler days should seek to reduce our government’s corporate welfare and entanglements.
Short of that, we’ll see plenty more disputes like this one.
Bruce Yandle is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a distinguished adjunct fellow with the Mercatus Center at George Mason University and dean emeritus of the Clemson University College of Business & Behavioral Science. He developed the “Bootleggers and Baptists” political model.
