Survey: Should Proton (or any GLC) Be Allowed To Fail?

[henry_yew]

Correct me if I am wrong on this matter, but I once came across that Volkswagon was interested in buying over Proton shares. The one thing that Volkswagon did not agree to was that despite the company owning 51% of the shares, the Malaysian government demands that the management reins are still given back to Proton.

Not a very wise move, in my opinion, for the government's side. Because not long after that, neither side came to a conclusion and eventually Volkswagon withdrew their offer.

If Volkswagon had really bought over Proton, I'm quite certain we would still benefit in terms of expertise and technology. It would also be good for Volkswagon as they need a place in the South-East Asia region to establish themselves firmly.

But in the end, if all of the above were untrue, still I would say that let Proton sink if it must. It's only through one's failure will people start to learn lessons, and often they still don't!

If Proton fails and is able to make a come back, then hopefully it could deliver far superior products to the people in the future. If it falls and never comes back, then we know that all this while we have been putting up with this brain-dead organisation for nothing, and have wasted taxpayers' money for more than two decades.

[digimushu]

Originally Posted by vikraman

Why would Nissan-Renault (a well-run, efficient company I might add.) take up the burden that is Chrysler? Chrysler will run down any company that it attaches to. (Although the prospect of a 3 Continent Super Car Maker sounds rather exciting!) Chrysler should take the Chapter 11, restructure, refinance (although how this is going to happen with the current credit starvation is anybody's guess.) and possibly merge with GM or buy Ford's Mazda unit (thus giving them a small car unit.)

Remember, I did say let Chrysler go bankrupt. By buying Chrysler's assets at bargain-basement prices, Nissan-Renault will catapult itself into the US market the same way that it catapulted itself into the Japanese market by buying Nissan. FYI, Nissan has been trying the last 3-4 years trying to penetrate the US minivan and Truck market. By absorbing Chrysler's product line, it will effectively have to do little or no research to expand itself within the US.

Will that happen? We will see when March rolls around...

[bluez_aspic]

re: bail-outs

I can imagine Chapter 11 provisions to be fairly controversial - interestingly enough, Lehman liquidated under Chapter 11 (instead of Chapter 7) to sell off its assets in a more orderly, value-maximizing way. The point is that in the event of a bankruptcy assets (e.g. factories, buildings, machines) don't simply disappear, nor does the entire industry sink - but capital will be re-organized (e.g. mergers and acquisitions) and debt wiped out if markets were left alone.

Having a bailout means you're transferring assets from the competent, the hardworking and the thrifty to the incompetent - i.e. allowing the incompetent to compete with the competent with their money. This is immoral - and there will be secondary consequences.

To claim that this is survival-of-the-fittest is missing the point. That businesses have to constantly evolve is rooted in the fact that demanding individuals have consumer preferences which are constantly evolving. Businesses are not profitable precisely because of the democratic process of the market - as Mises puts it, consumers disapprove the manner in which resources of limited availability are being allocated by entrepreneurs. Responsible government and central banking is to not distort market signals which could lead unfortunate individuals into making business errors.

Like it or not, capitalism is a rivalrous enterprise - and we are all the better for it. There are individuals who have made bad decisions, but they are also those who have made good decisions - correctly reading the world and anticipating economic trends, and thus are now in a position to profit. Someone reminded me that we tend to cry crocodile tears for the 'losers', but we forget to cheer the people who are winning because they have been prudent and wise.



re: the great depression

The Austrian understanding of the Great Depression is that it was an ordinary business cycle (described in some detail here) gone wrong due to the mistakes of central banks and government. An artifical economic boom was fuelled by loose monetary policy, and when the bust happened, Hoover - instead of allowing market forces to work and let things liquidate - decided to massively intervene in the economy and conduct 'rescue' operations. Roosevelt further intensified such measures and incorporated them into his 'New Deal' (in the process becoming a soft-fascist dictator) - e.g. fiscal stimulus packages, huge government spending, running budget deficits, price-fixing etc. These measures made the economic slump much worse and prolonged it (vindicated by the statistical figures) - ironically however, the 'official' version of history heralds Roosevelt as a saviour.

Most people would agree that the statistical figures only began to improve with America's entry into World War II - but the interpretation of the figures can be subtle. Unemployment figures declined dramatically - but that was largely due to military conscription (a.k.a. coerced slavery). Most economic resources were tied up in the war effort too, thus there were less civillian goods and services to go around (shortages and rationing were indeed part of daily life). So while people had jobs and paychecks, they were still poor and economic well-being didn't improve. It was only when capitalist principles were reinstated after the war that real economic recovery began.


re: good government

I am amused that some of those who are claiming that the bail-outs are a necessity were previously among the most outspoken against corporate welfarism; and those who strongly advocated free markets and minimal government are now making a complete reversal. If government can manage the economy during bad times, why not during good times as well? It doesn't make sense - especially in light of the fact that the crisis was engendered by years of disastrous fiscal and monetary policy.

What should be the proper role of government?

But for now, people haven't complained too much about the nationalization of industries, big corporations are happy, and politicians are getting extensive media coverage for 'saving' the day (while destroying tomorrow). Win-win-win situation!

btw a friend's business is in trouble - anyone interested in bailing him out? In fact I believe it to be a necessity due to human factors (he's a nice guy - he used to lend me his comic books, and he'd partially fund my Street Fighter games at the arcades) and which otherwise could lead to greater unemployment, weaken consumer spending and further weaken the economy.

Show him some love.

[henry_yew]

Originally Posted by bluez_aspic

Show him some love.

And once the love shown to him is excessive (that is, he takes advantage of the love), shall we dump him once and for all to rot?

(This was all spoken metaphorically; I hope you get my drift.) =D

[bluez_aspic]

Originally Posted by henry_yew

And once the love shown to him is excessive (that is, he takes advantage of the love), shall we dump him once and for all to rot?

(This was all spoken metaphorically; I hope you get my drift.) =D

Love shouldn't be exclusive, but should be extended to all - so if big corporations/GLCs are to receive subsidies/protection/bail-outs, then every small and medium enterprise deserves an equal measure of love too. In fact, they should also bail-out your friends, your uncle, your granny as well - and especially kintaro_kun who was begging for a hand-out some days ago

[chongkeat]

Ooo, OOOoo! I want some love too!

Anyway, there seems to be an enormous majority (including me) who voted for letting GLCs fail on their own. But there's only about 12 voters. Encouraging, but hardly conclusive?

[digimushu]

Bailing out is one thing...

My bigger beef with alll this is why does every new technological initiative that we have always fail? We fail to catch up with the industrial boom, even when we are in the thick of it (Proton, perwaja), we fail to profit from the dotcom era although we are strategically positioned for it at the best time, and we continuously fail to catch up with everybody as they are advancing in modern bio-nano areas.

Are Malaysians just cursed with bad leadership that we fail to plan for all situations or are we just bad at doing business in general? It seems that every major endeavour flops (Auto, MSC). Are we only the best at managing and owning plantations? I don't know. Perhaps time will tell, when we are overtaken by countries as small as Singapore, Korea and Japan!

[vikraman]

I don't know. Perhaps time will tell, when we are overtaken by countries as small as Singapore, Korea and Japan!

We were already overtaken by these three countries long ago. Japan in the 1960's, Korea in the 1970's and Singapore in the 1980's. The root of the problem is NEP, Corruption and Institutional Weakness. (The institutions I refer to are the police, the judiciary and the civil service.)

[digimushu]

Originally Posted by vikraman

We were already overtaken by these three countries long ago. Japan in the 1960's, Korea in the 1970's and Singapore in the 1980's.

My points exactly.

[bluez_aspic]

Most government schemes are destined to fail, because they are rarely managed on sound business principles nor designed to work in the first place - in fact, so long as they are backed by the executive power of government there is little incentive to do so. This is especially true when 'democracy' is involved (clever politicking, populism, catering to special interest groups etc) - there still exists a widespread lack of understanding of business and economic principles.