The mood is turning decidedly ugly in the United States as the public becomes more and more horrified at bailout efforts by President Barack Obama and his team. The latest outrage involves the unceremonious axing of the head of General Motors, without handing out pink slips to the Wall Street and other financial sector incompetents who ruined the global economy.
Wagoner's departure is a cynical exercise in optics. It's reminiscent to the ancient practice of primitives who decapitated vanquished generals in front of their defeated troops. The idea was to scare the wits out of everyone and to appear to be willing to punish the privileged while saving the underprivileged.
Well it won't work in this case because GM's felled boss, Rick Wagoner, is not being destroyed. He's going to skip down to Florida or Arizona with US$20 million worth of severance and pension entitlements. That amount of money would employ alot of GM employees or pay alot of suppliers and represents another insult to the millions of auto-dependent workers whose lives are heading for the ditch. It also illustrates how rotten and corrupt American "capitalism" has become with top dogs grabbing obscene payouts despite ineptitude.
Nothing will work
Detroit's Big Three will be in bankruptcy protection before summer arrives. The sector will be forced to merge into one American-controlled company with a workforce one-third its current size. Along the way, its workers, bondholders, pensioners, lenders and suppliers will be forced to take even more massive financial haircuts.
This is probably what should have happened months ago if the American regimes -- Republican then Democratic -- would have had the gumption to admit that the American economies, both real and financial, were bust.
By the way, if Wall Street and the financial sector had been put into Chapter 11, the White House would have been able to do the necessary bloodletting, avoid obscene bonuses and impose huge paycuts. Meanwhile, Canada is dragged into this Detroit mess in order to protect its share of auto jobs and parts manufacturing as are all other automakers who sell into the U.S. market.
It's about Washington, not Detroit
Also to blame in all of this is the fatal flaw of American-style democracy. The U.S. government with its checks and balances is glacial, polarized and parochial. Congress and the White House are always at odds which guarantees that compromises and strangulation are givens. This brings to light America's biggest single impediment. Detroit cannot save itself or be saved until the federal government decides on future fuel efficiency standards or other regulations for new vehicles. The odds of that happening quickly are minimal.
What this means is that car makers, both domestic and foreign, are left with a Great Recession and are also in limbo, unable to recalibrate, redesign or retool. America's systemic governance rigamordis will cost taxpayers plenty more and possibly cost Detroit its last chance to turn around. Chopping off the head, figuratively, of a high-profile CEO won't cut it, especially when the failure to put companies into bankruptcy protection allowed him to walk off with an obscene retirement benefit.
It all means that the biggest sunset industry dragging down America is its own governmental system in Washington, enshrined in a constitution that should have been repurposed, redesigned and retooled a long time ago.