Hold on to your hats because the next phase of the Grand Unification Bailout is about to unfold. Already, the government has given up on using the $700 billion for what they originally said it was for. Already, Hank Paulson, who played no small role in making this mess, has admitted that the planned approach won’t work as well as government buying equity stakes, even though those toxic debts are at the core of the problem. (So now we are having to treat symptoms. Nice.) Already AIG has nearly doubled the amount of help it needs (with no guarantee that this is the bottom of that bottomless pit, but close to a guarantee that the government will keep throwing good money after bad).
Clearly, Paulson is winging it. On the bright side, he is at least saying today that he won’t try to burn the entire $700 billion, but will leave half of it for his successor in the Obama administration. That passes for good economic news these days.
And now, here comes the big three, asking for us to bail out their investors because they haven’t had the leadership to notice little market details like, say, we’re running out of oil so the automobile industry has to shrink.
So what do we do now?
Granted, letting one or more of these companies fall is going to have a severe impact. Worse still, this impact is going to be concentrated in a state and region that has been struggling for a long time. On the other hand, what would a bailout really do? Some are saying that it would actually be counterproductive because it would interfere with a much-needed restructuring that would result in an auto industry that has some hope of competing and surviving in the long term.
I suspect that there is truth to this, but my point is – as usual! – to see if there is some way that a cooperative model might work out. Rather than shoveling money into an industry that remains in the hands of those who have been driving it into the ground, how else could we meet the legitimate need to preserve possibly millions of high-paying jobs?
For starters, the capital infusion could come through a program to encourage employee ownership, perhaps in the form of a loan guarantee program:
This probably wouldn’t work as a co-op. Too big and messy. However, there is a great case to be made for an Employee Stock Ownership Plan (ESOP) which is incidentally a business model that already involves more than 10 million workers in this country, including those at UPS, Southwest Airlines, and many many many others. And this is no harebrained lefty scheme. Check out a recent resolution in Congress on the subject: http://www.govtrack.us/congress/billtext.xpd?bill=hc110-333 includes the claim that ESOPs “have better sales, are more sustainable, pay better, and provide more retirement savings compared to similar companies that are not employee-owned.” Interesting, no?
And look at who wrote the thing. Perhaps a democrat?
Nope. It’s the work of Rep. Dana Rohrabacher, a staunch conservative from southern California who is a social conservative of the highest order, who is strongly opposed to illegal immigration, doesn’t believe in global warming, and supports medical marijuana. He is also a surfer. Check him out: http://rohrabacher.house.gov/
It is also important to know that Rohrabacher has quite a history of these sorts of ideas. He once proposed turning the Post Office into an ESOP, and in 1999 coauthored a bill with Bernie Sanders of Vermont (yes, the Socialist) to create something beyond ESOPs, and which would address some of the ESOP’s shortcomings. These unlikely bedfellows proposed a new form of business that would essentially be democratically controlled by its employees. This bill even stated that the United States government should have a policy that “by the year 2010, 30 percent of all United States corporations are owned and controlled by employees of the corporations.” More information on this at http://dept.kent.edu/oeoc/PublicationsResearch/Sum1999/EOOwnedSum1999.html
There is still time! We’ve still got more than a year, and Michigan is a great place to start. Go Dana!