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Monday, June 01, 2009

Governments nationalize GM: Where do we go from here?

Well, it's official: General Motors (GM) filed for bankruptcy protection in New York this morning. As part of its restructuring efforts, the company will take $10.5 billion from the federal and Ontario governments, representing about 16 per cent of the $59 billion bailout package. In return, Canada will get a 12 per cent share in the company, a seat on the board of directors, and will retain 16 per cent of the company's production. The American government is expected to own approximately 60 per cent of the company once the restructuring is complete.

What this all means is that North American governments have nationalized the auto industry. One could wonder whether or not they woke up this morning in the free world or post-war Czechoslovakia. It's just too bad the Canadian government sold off its stake in Petro Canada. We could have purchased our automobiles and gasoline from state owned companies.

So why did the Conservative government abandon its free market principles in favour of spending billions on corporate welfare? The move may not have been good economics, but it was politically expedient. "The government of the U.S. has made a decision it will engage in politically driven restructuring of GM," said Prime Minister Stephen Harper. "Either we participate or these companies which are big in the economy will simply be restructured out of Canada. That's not a reasonable alternative. We are committed to participating."

If Canada had not provided this bailout money, production would have shifted to the U.S. in order to take advantage of the subsidies that country is providing. This would have meant that even more Canadian jobs would be lost, which would have been political suicide for the Conservative government. It's quite apparent that all of the parties in the House of Commons would make have made same move if given the chance. The big problem is that we no longer have any parties calling for fiscal restraint.

Bailing out companies, even if they are "too big to fail," shows a complete disregard for free market principles. Markets work because they treat companies like children. If you screw up, you pay the price. Bailouts send the opposite signal: if you screw up, the state will save you. You won't, however, hear anyone in Parliament saying this, even as the country runs a historic deficit. As we discussed last week, the opposition parties are hammering the government about the deficit, while hypocritically advocating increases in government spending at the same time.

This leaves a void on the right side of the Canadian political spectrum. With an unstable minority government in Ottawa, are conservatives prepared for the government's eventual collapse?

Are there any parties worthy of the fiscal conservative vote in the next election? The Conservatives have moved to the centre, run up the largest deficit in Canadian history, and nationalized GM. The Liberals did a decent job of managing the economy in the 1990s, but this is the same party that stole millions of taxpayer dollars and, as recently as the last election, advocated a carbon tax that would have been devastating to the Canadian economy.

The logical alternative would be the Libertarian Party of Canada. However, the party has a lot to do if it hopes to win even a single seat in the next election. Despite being the perfect time for a "third-party" to scoop up a good chunk of the fiscally conservative vote, the party will not be taken seriously unless it improves its brand, reforms its policies, and runs a full slate of candidates.

First, the party needs to do a much better job of marketing itself. Many Canadians do not even know it exists and its website looks like something I might have put together circa 1995. The party would need to take advantage of new media technologies if it hopes to get its message out and build grassroots support among Canadians. Second, the party would have to reform some of its policies to make them more palatable to mainstream voters. I am not saying that libertarians should sacrifice their principles, only that they should be realistic and realize that a principled stand often comes into conflict with the realities of our democratic political system. Even a more moderate Libertarian Party would be better than the Conservatives.

Finally, it is essential that the party run candidates in every riding. This is a necessary element for a political party to be taken seriously and as we saw with the Green Party in the last election, it doesn't take much to be included in the leadership debate. This would mean that ordinary Canadians would need to step up to the plate and put their names on the ballot in the next election. I'm sure we can find 308 Canadians that believe in fiscal restraint. Do Canadian conservatives have what it takes to get a fiscally conservative party into the House of Commons? It certainly would not be an easy task, but for the sake of our economy and future generations of Canadians, it's one that is worth putting effort into.

Posted by Jesse Kline on June 1, 2009 in Canadian Politics | Permalink


"Are there any parties worthy of the fiscal conservative vote in the next election?"


Posted by: Farmer Joe | 2009-06-01 8:23:52 PM

The logical alternative would be the Libertarian Party of Canada.
Posted by Jesse Kline on June 1, 2009


Posted by: The Stig | 2009-06-01 8:48:49 PM

Hey I know...Now that they are the "Government Motors Corp." they could streamline all of their vehicles down to one model. We could call it....the Lada. No that's been done. Hmmmm...
How about the Obamamobile? Or the Oldsmobama?
Come on guys n Gals...let's help them out with some suggestions.

Posted by: The original JC | 2009-06-01 9:17:34 PM

Boy am I glad that I drive a Honda. It's the best car I ever owned. I'm never buying a North American car brand ever again.

Posted by: Zebulon Pike | 2009-06-01 9:34:25 PM

I hope the New GM builds bicycles, motorcycles, public transit vehicles' construction machinery- and appliances like refrigerators and stoves.. ...as well as slutty looking cars..

Posted by: 419 | 2009-06-01 10:02:48 PM

In the past I owned two Toyotas. I now drive a Mercury Sable (99). It is by far the best car I have owned in terms of performance and reliability. I have also owned two high end European cars that could not compare with the Merc for reliability but performed well on the highway.

Posted by: DML | 2009-06-01 11:14:54 PM

"Do Canadian conservatives have what it takes to get a fiscally conservative party into the House of Commons?"

Canadian conservatives are so retarded when it comes to social and foreign policy issues, they would accept any expansion of government for a chance to push further their beliefs and ideologies.

They always say the CPC is the only choice at hand considering the other alternatives.
It is important to understand what they mean by that and it goes like this: As long as Harper keeps us at war with Muslims and he gets the country closer to a theocracy, he has our unconditional support as to how he manages the economy, foreign relations and the size of government.

While millions of people do not subscribe as “social conservatives” in Canada, it doesn’t take the head of Papineau to understand the present administration is on his way out in the next election.
Once out, the CPC will not see the light for ten or more years; or until the next Liberal administration get caught again and exposed for what they are.

Don’t ask if Canadian Conservatives have what it takes; ask why fiscal conservatives in Canada, and in the U.S., are unable to sell their very appealing ideas within their own party. The answer is simple: “Western Democracy” is an illusion.
Social conservatives and other groups of interests close to the party always make sure fiscal conservatives are rapidly marginalised.

Canadians would vote massively for fiscally responsible liberals but politicians fitting that description are not born yet. In less than ten years, Canadian Conservatives and U.S. Republicans have enabled a structure where fear and ignorance allow the government to throw away our resources, our economy and liberties. Thanks to them, all federal parties are now free to grow the size of government while reducing our freedom.
From now on, our voices won’t change a thing.
Who’s gonna clean this mess…? Lobbyists…? MSM…? The CPC…!?!?

“Fiscal conservatives”…
Name one and make us believe he has any chance of passing through Western Democracy’s filters.
That’s all I’m asking...show me your kicker.

The only chance we have to slow down our collective fall into fascism is if one region has enough willingness to believe in his independence.

Posted by: Marc | 2009-06-02 1:04:40 AM

"The only chance we have to slow down our collective fall into fascism is if one region has enough willingness to believe in his independence."

As yes, Quebec, the land of the free. Where free market ideology runs unchallenged.

Marc, I would gladly vote for sovereignty if I thought it would lead to more freedom. It wouldn't, it would simply lead to Quebec becoming the next Venezuela.

Posted by: Charles | 2009-06-02 6:48:17 AM

I think you need to read through the Green Party platform. I realize that the public perception is that the Green Party is a single issue party, and to be fair the Green Party certainly was a single issue party but it is NOT anymore.

Many former Progressive Conservatives who were fiscally responsible but socially progressive or at least socially moderate were uncomfortable with the Progressive Conservatives Reform/Alliance merger.

Many of these former PC's joined the Green Party and have helped them develop a fiscally responsible platform. I suggest that if you are looking for a fiscally responsible party that you read through the Green Party's platform:

Posted by: Dave Bagler | 2009-06-02 8:38:53 AM


Sorry, I can't take you seriously with Lizzie 'Watermelon' May at the helm.

Posted by: K Stricker | 2009-06-02 2:54:04 PM

16% isn't nationalization…Perhaps it IS fiscaly responsible. If the company makes it back, and fights it's way back to #1 without the crushing union contracts the Canadian people stand to make billions rather than lose billions.

Let's not forget that GM actually makes a lot of cars people DO buy, not JUST ones they don't. GM turns about 150 different cars in more than 50 models off their production lines, and the car itself is dirt cheap compared to their counterparts at Toyota and Honda, they've been losing all the profit to the union. Nobody can make a care more efficiently than GM.

Chop 50 models to 12, lose the GMC, Saturn and Pontiac brands, decrease labor costs and stop building "more of the same" cars and they could actually make money. Shocking. Did you know people actually buy the Corvette? THOUSANDS on THOUSANDS of them every year, same with the Malibu and the trucks tell hundreds of thousands.

Right now though GM makes 4 midsize cars! and 8 large sedans!

If the governments have the balls to slay the union and keep it dead, (which they really won't) then GM could pay back back a ton of money.

Also nationalization puts the company under direct national control, not a member on a board seat or a minority stake.

Stop fear mongering.

That said I'm still against it.

Posted by: Pete | 2009-06-02 3:18:54 PM

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