Saving the American Auto Industry

US car makers are in the news right now as just the latest in a line of beggars knocking on Washington’s door. They’re asking for $37 billion in support from cheap finance because, as GM’s Rick Waggoner puts it, “We made mistakes, and because circumstances beyond our control pushed us to the brink,” referring to the global economic downturn.”

Except for one thing. As I wrote in 2007, Ford has been making losses for years and the others haven’t done so well either. While they didn’t change their strategies, newcomers have set up shop in the US and grown and grown and grown – profitably.

The actions of the US car giants so reminds me of the 1960s in Britain, when the British motorcycle industry sank from world leader to bankrupt nothingness in a decade, and the British car industry was Nationalised to the point of rewarding failure with survival while punishing companies who were successful by not allowing weak competition to disappear.

The current US proposals for bail out are very uniquely US focussed. ”It’s got to be US projects – it would by and large favour, on balance, US companies.“ General Motor’s Fritz Henderson was reported as saying. Conveniently, there is a clause excluding support for US plants that have been built during the last 20 years. That means very little money for newcomers such as Honda, Toyota and VW who all make cars in the US in volume.

US workers working in those factories will not be protected, it seems. Except, for the most part, they don’t need to be.

There are problems for the US over this policy though. First off, there are the issues of illegal state support that will no doubt at some point be raised at the WTO. The US was the first to complain on behalf of Boeing that Airbus was receiving illegal money.

There is an even more serious issue hiding in the shadows here though. If the deal goes through and is seen by outsiders as discriminating against foreign investors, the attractiveness of the US as a place for inward capital flows will diminish – and with a double deficit in both government spending and trade the US Dollar relies on inward capital flows to support the greenback.

While the Dollar has been lifted of late by Barack Obama’s recent election victory and world woes, it is still based on weak fundamentals. I do think Obama will do a good job for the US here though, so perhaps the US will once again build the kind of budget surplus that accumulated under Bill Clinton’s Democrat Administrations.

As for the car industry, I can’t help thinking they still really don’t get it. I think it was GM who was talking of using the money from Uncle Sam to launch some 22 new models of greener vehicles.  Twenty two new models?! No wonder they can’t make a profit, they have too many models, too many brands.

They really need a clean out. But will they get one? Not if their political influence has anything to do with it. What they want is the bail out, not the clean out.

Britain’s Parliamentary Democracy is slowly crumbling away

British MPs have enjoyed what is known as “Parliamentary Privilege” for hundreds of years, since Henry VIII in fact. This has prevented them from being arrested in Parliament, and allowed them free speech immune from prosecution.

It is the job of the Speaker of the House of Commons, and the Serjeant at Arms, to protect and uphold the rules of the Houses of Parliament, and to protect parliamentary privilege. In fact, the English Civil War was started when the King attempted to have five MPs arrested within the House.

On 27th November 2008, it happened again. The police marched in and arrested Tory MP Damian Green, searched his office and took away his computers and disks. Without a warrant. 

Unfortunately, it seems we have a rather weak Speaker of the House at the moment, and his Serjeant at Arms seems to have just caved in to whatever the police asked of her. Not only did she not refuse them access, which is her duty as well as her job, she also didn’t ask the Clerk of the House (pdf) for advice on what she or the Police could or could not do, and then she even signed a Consent Form allowing the police entry to the MPs office without any involvement from anyone else.

In such a case as this it would be easy to paint her as the scapegoat in this story, but to my mind it shows more a portrait of the Speaker as a weak man with little control over his underlings, and from his own mouth little knowledge of events that are his responsibility. He clearly has an iron grip on things.

Meanwhile, Jacqui Smith, Home Office Minister in charge of the Police claimed “ignorance” about the matter, although she did admit in Parliament that the Cabinet Office was involved – and she is of course a member of the Cabinet. The Serjeant at Arms, always previously an ex-Army officer who enforced the rules rigorously but now no more than an office manager who clearly didn’t know the rules and who didn’t request to see a warrant just let them walk past her rather than doing her job of protecting Parliamentary privilege. Scottish Labour MP and Prime Minister Gordon Brown says he has a “great deal of confidence” in fellow Scottish Labour MP and Speaker of the House, Michael Martin.

The Speaker of course has a lot of power over MPs, so you won’t hear many of them slagging the Speaker off. But over his own underlings, clearly he exercises little control at all. For instance, today the Speaker, rather limply, if not exceedingly limply, only managed to squeak out some ineffectual nonsense about he “did not know the Police did not have a warrant…” Clearly he should be more in control of his underlings so they do inform him then.

One of the foundation stones of any healthy democracy is adherence to and respect for the rule of law, but it seems even at the the highest levels of British political life, liberties are being taken that affect all our freedoms.

It certainly seems we need more than at anytime a Government which believes in Civil Liberties, rather than one composed of either of today’s two most partisan parties, the Labs or the Cons. Unfortunately, I don’t think the LibDems yet have the ear of the people although they probably do have many of the right ideas.