Economic uncertainty

The recent forced resignation of GM's CEO may be good politically — although that's questionable — but it's terrible economically. The economic picture is unsettled, which sharply reduces the dependability of long-term and even short-term forecasting. Businesses depend on forecasting to make investments, create jobs, increase or decrease production, and pretty much every other part of their operations. Uncertainty is normal, but high levels of uncertainty act to depress all economic activity . . . and the US government playing kingmaker with the heads of major corporations is a hell of way to create more uncertainty.

The specific merits of the Richard Wagoner dismissal are unimportant compared to the extra measure of uncertainty injected into the economy as a whole. If President Obama and his team can dismiss Wagoner, why not the heads of any bank accepting government funding? Why not other corporate officers (corporate directors have already been ousted at government whim)? At what level does the government's self-created new power stop?

The direction the US federal government has set will do nothing to settle economic worries, and much to increase them. The clear belief on the part of the administration is that they are better able to pick the winners and losers of economic activity of which most of them have no practical experience. That is a modern definition of hubris.

On the specifics of GM's (and Chrysler's) plight, I've been saying that they should have gone into formal bankruptcy last year. It would have been bad, for many people (suppliers, employees, and shareholders most directly), but it would have had the merit of being the best way to legally¹ and quickly² sort out the businesses, determining whether they are still viable or whether they are best broken up and sold off to the highest bidder. This life-in-death state under close government supervision is becoming the worst of all possible worlds. Nothing can be settled, everything is subject to radical change at the drop of a political hat, and nobody can see an end to the turmoil.

¹ Legally, in the sense that the laws are already on the books, tested, and workable. Not requiring additional legislation passed in the wee small hours of the morning by sleepy congressmen and senators who haven't read any of the bill being passed.

² Quickly, of course, is a relative term. Even a best-case fast resolution of a bankruptcy this size would be years, not months in length.