Thursday, June 04, 2009
On boycotting GM and Chrysler
I read and hear my friend Hugh Hewitt bemoan the socialization of GM and Chrysler's profits and losses, and calls for a boycott. Most of the time it's the Left that calls for economic boycotts -- Cesar Chavez in the Seventies, South Africa in the Eighties, Israel nowadays. But lately the American conservative has decided it's cool to boycott French wines, and now is going to get into calling GM Government Motors.
Freedom of contract mean we get to buy and sell goods with anyone we choose, for whatever reasons we want to. That right to choose means the right to discriminate against certain folks we don't want to buy from, or in favor of those we do. So it's right for Hugh or anyone else to try to persuade us not to buy GM, and it's right for someone to try to persuade me not to buy Israeli products because they're sold by people who (the boycotter says) oppress others. And I'm free to agree or disagree. You're free to hire cute blondes (even Latvian blondes!) to try to persuade me to buy a Corvette, and my wife is free to persuade me to pay that blonde no nevermind or else it's the couch for me! Free markets work by persuasion.
What is the purpose of a boycott? Typically to change behavior of the people against whom you are boycotting. In his interview with Paul Rubin of White Bear Lake Superstore -- where both Hugh and NARN* have broadcast in the past -- Hugh argues that a successful boycott will get the government to divest of GM. He also argues that if the GM socialization is successful it will breed other socializations of private firms. But we cannot force them to do this: All we can do is to make the political calculation of the costs and benefits of socialization work in favor of divestment of GM and Chrysler. That does not require votes; adding $50 billion to a $1.8 trillion deficit isn't going to create any pain upon the White House. It will put pain on Paul Rubin; Hugh's calculation is that Paul's pain is a necessary cost to meet Hugh's goals.
So how is it that Hugh's boycott will work? It's worth noting that the "Freedom Fries" boycott was estimated to reduce French imports to the U.S. by 15% and U.S. exports to France by 8%. Not too big an effect there. And the apartheid boycott of South Africa didn't do much good either. The boycott will make great radio and vociferious editorials, but the impact of them is unlikely to do much good. Particularly when the UAW and other union leaders will funnel millions in campaign contributions to keep the government money coming.
And lastly, what has happened at GM and Chrysler (the latter temporarily, though it will maintain a minority interest for the foreseeable future) is that the government is accepting a bigger share of the gains and losses those two places make in the market. The impact of losing the entire $50 billion invested in GM will be about $362 per taxpayer (there were about 138 million in 2007.) If more of us crowd Ford and Toyota the price of those cars go up; the GM and Chrysler lots will be more inviting thanks to elbow room and lower prices. Selling at a loss is not an issue for government, which can always tax to make up those losses. (It does for Amtrak already.) Socializing profits and losses -- I used that term in the first sentence for a reason -- means that using an economic means to make a political point will be ineffective because the losses are spread throughout the populace, not focused on the Obama team.
The boycott will make some people feel good. But if you want to stop the socialization of American business, take it out at the ballot box, not on the dealer caught in the middle.
*--Full disclosure: I have been part of those broadcasts in the past, but have not been at the Superstore since creating the Final Word segment of NARN.
Freedom of contract mean we get to buy and sell goods with anyone we choose, for whatever reasons we want to. That right to choose means the right to discriminate against certain folks we don't want to buy from, or in favor of those we do. So it's right for Hugh or anyone else to try to persuade us not to buy GM, and it's right for someone to try to persuade me not to buy Israeli products because they're sold by people who (the boycotter says) oppress others. And I'm free to agree or disagree. You're free to hire cute blondes (even Latvian blondes!) to try to persuade me to buy a Corvette, and my wife is free to persuade me to pay that blonde no nevermind or else it's the couch for me! Free markets work by persuasion.
What is the purpose of a boycott? Typically to change behavior of the people against whom you are boycotting. In his interview with Paul Rubin of White Bear Lake Superstore -- where both Hugh and NARN* have broadcast in the past -- Hugh argues that a successful boycott will get the government to divest of GM. He also argues that if the GM socialization is successful it will breed other socializations of private firms. But we cannot force them to do this: All we can do is to make the political calculation of the costs and benefits of socialization work in favor of divestment of GM and Chrysler. That does not require votes; adding $50 billion to a $1.8 trillion deficit isn't going to create any pain upon the White House. It will put pain on Paul Rubin; Hugh's calculation is that Paul's pain is a necessary cost to meet Hugh's goals.
So how is it that Hugh's boycott will work? It's worth noting that the "Freedom Fries" boycott was estimated to reduce French imports to the U.S. by 15% and U.S. exports to France by 8%. Not too big an effect there. And the apartheid boycott of South Africa didn't do much good either. The boycott will make great radio and vociferious editorials, but the impact of them is unlikely to do much good. Particularly when the UAW and other union leaders will funnel millions in campaign contributions to keep the government money coming.
And lastly, what has happened at GM and Chrysler (the latter temporarily, though it will maintain a minority interest for the foreseeable future) is that the government is accepting a bigger share of the gains and losses those two places make in the market. The impact of losing the entire $50 billion invested in GM will be about $362 per taxpayer (there were about 138 million in 2007.) If more of us crowd Ford and Toyota the price of those cars go up; the GM and Chrysler lots will be more inviting thanks to elbow room and lower prices. Selling at a loss is not an issue for government, which can always tax to make up those losses. (It does for Amtrak already.) Socializing profits and losses -- I used that term in the first sentence for a reason -- means that using an economic means to make a political point will be ineffective because the losses are spread throughout the populace, not focused on the Obama team.
The boycott will make some people feel good. But if you want to stop the socialization of American business, take it out at the ballot box, not on the dealer caught in the middle.
*--Full disclosure: I have been part of those broadcasts in the past, but have not been at the Superstore since creating the Final Word segment of NARN.
Labels: AM1280, commissioner, economics, NARN
