Or on one hand you have a $35bil loan, that may not be paid back (or if it is we may need new bailouts later) and that keeps labor and capital (much more than $35bil a year of the later) tied up in unprofitable activities, while creating the moral hazard of anticipation of future bailouts.
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Over the past decade, the capital destruction by GM has been breathtaking, on a greater scale than documented by Mr. Jensen for the 1980s. GM has invested $310 billion in its business between 1998 and 2007. The total depreciation of GM's physical plant during this period was $128 billion, meaning that a net $182 billion of society's capital has been pumped into GM over the past decade -- a waste of about $1.5 billion per month of national savings. The story at Ford has not been as adverse but is still disheartening, as Ford has invested $155 billion and consumed $8 billion net of depreciation since 1998.
As a society, we have very little to show for this $465 billion. At the end of 1998, GM's market capitalization was $46 billion and Ford's was $71 billion. Today both firms have negligible value, with share prices in the low single digits. Both are facing imminent bankruptcy and delisting from the major stock exchanges. Along with management, the companies' unions and even their regulators in Washington may have their own culpability, a topic that merits its own separate discussion. Yet one can only imagine how the $465 billion could have been used better -- for instance, GM and Ford could have closed their own facilities and acquired all of the shares of Honda, Toyota, Nissan and Volkswagen.
online.wsj.com
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While on the other you have the main frontline fighter for the US for the next 30 or 40 years, without which we will have fighters that where great in their day (and are still very good) but which are getting older, and will be getting obsolete, and falling apart.
Arguably we didn't need BOTH the F-22 and the F-35 but we needed at least one of them, and a huge chunk of the costs are now sunk costs. We already paid to develop them and build the production lines. (And for the F-22 we've already paid for a large fraction of the planes we are likely to buy, over a 100 out of probably 250 or so).
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And of course even if the F-35 program is the biggest waste in history, it does nothing to justify the bailout. In fact to the extent that we've wasted resources on it, it should give us more incentive to be careful with how we use resources in the future. |
