Friday, December 09, 2005

GM: The Agony Continues- Part 4

General Motor’s CEO Rick Waggoner’s op-ed piece in the Wall Street Journal Tuesday morning contained an interesting little bit of monetary policy information which almost escaped my attention, and may have eluded yours as well.

"… This ignores the fact that American auto makers and other traditional manufacturing companies created a social contract with government and labor that raised America's standard of living and provided much of the economic growth of the 20th century. American manufacturers were once held up as good corporate citizens for providing these benefits. Today, we are maligned for our poor judgment in "giving away" such benefits 40 years ago…."

Waggoner is saying that GM and other large US corporations privately monetized future promised benefits as a form of currency to lubricate and drive US economic growth. He implies that they promised wealth in order to drive more consumption on the part of the workers. He seems to be arguing that making false promises which accelerated US growth in prior decades is defensible on the basis of the end, namely, falsely promising undeliverable benefits.

Is this amazing, or what?

First, Waggoner effectively admits that corporate America has been privately creating money by issuing dubious pension promises. As if GM hasn’t had enough difficulty just being a consistently-good investment for its shareholders, it apparently dabbled in monetary policy, too.

Then, with unmitigated gall, Waggoner goes on to suggest that making pension promises which have turned out to be unaffordable was justified, because it caused workers to feel wealthier, spend a lot more money, and drive economic growth.

Maybe Rick Waggoner would be better off not speaking or writing anymore, and trying to find a merger partner for his wreck of a company, while it still has some cachet with a few buyers in some of its customer segments.

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