The Ethical Case for Boycotting Chrysler and GM

The Ethical Case for Boycotting Chrysler and GM

By Gary Jason

In business ethics, the typical way one makes a judgment about the morality of a business action or practice is to consider the facts surrounding it in the light of four major ethical perspectives. These four ethical theories have been the ones considered most plausible in over two millennia of moral philosophy.


The first perspective is the natural rights view, or what I will call the (A) rights perspective. This view judges an action or practice by asking whether it flows from the rights of those doing it, and more importantly, if it violates the rights of others.


The second perspective is the (B) consistency perspective. This view judges an action or practice by asking what would happen if it were done or practiced by everyone, not just those involved in this situation. It is the view expressed by the Golden Rule, a rule common to most major religions.


The third perspective is the (C) virtue perspective. This view asks whether the action or practice corrupts or enhances people’s characters.


The fourth perspective is the (D) utilitarian perspective. This view looks to the consequences that will likely flow from the action or practice, and judges it right to the degree those consequences are the best for society over the long term.


I will argue that the unprecedented action by the current administration in manipulating the bankruptcies of Chrysler and GM, and in effect nationalizing the companies, is egregiously unethical by every one of these major ethical perspectives. For this reason, I believe that this action makes it morally imperative for Americans to boycott these socialized companies.


Consider first the facts. In these two cases, rather than let the free market and the legal system (specifically, the bankruptcy court) handle the reorganization of the failing auto makers in the normal way, the Obama administration spent tens of billions in taxpayers’ dollars to take control of the companies and force the outcome it wanted. Obama, who received millions in contributions from the United Auto Workers union, has forced a settlement that will give UAW far more equity in the companies when they come out of bankruptcy than it was due compared to the secured debt holders.[i] Obama’s agents used threats and intimidation (calling holdout bondholders speculators and hedge funds at one point) to get the creditors to accept being shafted. ( 5/11/09)The result is that the vast majority of the two companies will be almost clearly owned by the federal government and the UAW, and the UAW arguably controls the federal government.


The result is drenched in irony. The UAW was a major reason why the companies hit the wall, and now the UAW will be rewarded with major control and ownership. It is as if a rape victim were forced to marry her rapist. The result makes the crony capitalism we saw in Russia look clean by comparison; it, at least, was a kind of capitalism.


This situation is ethically repugnant form every perspective. Consider the facts from the (A) rights perspective. The secured creditors’ rights to a just settlement have been completely violated. And these bondholders, despite the defamation of Obama and his myrmidons, are not just soulless capitalist speculators. They include regular folk, yes, and even some even blue collar workers, who held these assets as part of their retirement portfolios. ( 5/27/09). It also included teacher and police pension funds, and state infrastructure construction funds. ( 5/21/09)


The rights of all the stakeholders at the competing car companies have been violated as well. Their workers, stockholders, and managers will now be compelled to pay taxes that will fund their competitors. Consumers of other car companies will wind up paying taxes to build the very cars they chose not to buy. And taxpayers with no health insurance will pay to maintain the sweet health benefits of UAW members.


From the (B) consistency perspective, the nationalization of Chrysler and GM seems obviously wrong. By using his political power, Obama has forced the bankruptcy court to put aside longstanding settled principles, especially the rule that secured creditors get priority in receiving assets from a defunct entity. Worse yet, Obama abused his power to benefit his supporter and benefactor, the UAW. What if every president did this sort of thing? Would any legal system that gave citizens equal protection under the law even be possible? Hardly.


From the (C) virtue perspective, again we see that the nationalization is unacceptable. It will corrupt unions and businesses alike, by leading them to negotiate obviously unsustainable contracts, safe in the knowledge that by paying off the pols the federal government will step in to save them from the consequences of their dishonesty.


Finally, from the (D) utilitarian perspective, the forced nationalization of the auto industry is unethical. We are seeing just the start of the negative consequences that will flow from this act of statist hubris.


To start with the obvious, even though Obama denies that he will manage the companies, we have all learned by now that he has no problem doing the very thing he is denying. (In ordinary life this political artfulness is called lying). He fired one CEO, forced Chrysler to accept Fiat ( 6/5/09), told GM that it cannot move its headquarters out of Detroit ( 6/3/09), and may have ordered that whoever buys GM’s European auto maker Opel must agree not to export cars to the U.S.. ( 6/1/09) These decisions were made in secret with no Congressional oversight, by a man with no training or experience of any kind in business, never mind the auto business.


The companies will be run by politicians, who will make decisions for the benefit of political agendas rather than on sound business principles. The result will be that the auto companies and the union will not make the deep changes required to make the companies profitable, so we can anticipate many more cash infusions.


Worse yet, we can foresee that now that the UAW and feds have control of Chrysler and GM, they won’t stop there. Their natural instinct will be to achieve monopolistic control. The UAW has helped drive Chrysler and GM to the wall and is now co-owner with the government of most of the equity. They will likely next target Ford, to get equity ownership of it. Then look for the UAW and the administration it controls to attempt to force the employees of foreign auto makers in this country to join the UAW, or use environmental and other regulatory laws to put those companies out of business.


But the negative consequences will spread well beyond the auto industry. By so conspicuously stiffing the bondholders in favor of his political supporters, Obama has made raising capital vastly more difficult. Every investor now knows that past bankruptcy law means nothing; if the President is paid enough by some special interest group, he will rip off the secured debt holders to satisfy his supporters. This will surely lower the demand for corporate bonds, leading to less capital for business expansion, hence fewer jobs.


We have in this debacle an ironic illustration of what the economist Frederic Bastiat warned us about in his classic essay, “The Seen and the Unseen.” What Obama hopes we will see are the thousands of UAW jobs saved. What he knows we won’t see are all the jobs that will be lost or not created because of his dictatorial conduct.


The citizenry needs to make it clear this nationalization will not be permitted to succeed. We need to boycott these companies, and tell this rogue administration exactly what we are doing. The alternative is that they will do this again.


Gary Jason is a contributing editor of Liberty, and an instructor of business ethics.


[i] In the case of GM, the bondholders likely will get 10% of the common stock in the reorganized company for the $27 billion they are owed. The UAW will get $10 billion in taxpayer cash, plus 17.5% of the new company’s common stock, $2.5 billion in bonds, and $6.5 billion in new preferred stock, paying a 9% dividend, all for the $20 billion it is owed. ( 6/1/09) In the case of Chrysler, the bondholders will get $2 billion in cash for the $6.9 billion they are owed, with no equity. The UAW will get 55% of the new company, for “forgiving” $6 billion in promised retiree health care-really, just unsecured debt that would have been in second place in a proper bankruptcy. ( 5/1/09).

Page Printed from: at June 10, 2009 – 08:13:19 PM EDT

Obama and the Settlements–Obama is transforming himself into America’s first Muslim President, much as Bill Clinton was hailed as the first black one.

Obama and the Settlements

By Richard Baehr

Why is Barack Obama spending so much time focusing on Israeli settlements in the West Bank? Two thoughtful explanations of the widening dispute on the settlements issue have been developed  by Dore Gold and George Friedman.

What is clear is that Obama has chosen to pick a fight with Israel. Friedman argues Obama has chosen his fight carefully, on an issue on which the Jewish community both in Israel and the US is split, and therefore resistance will be weaker. The question of course is why? Is it because Obama believes he will now get more support in the Muslim world for US actions in Iraq and Afghanistan if he appears to be cutting Israel loose? How likely is this?  What kind of support in each country does Obama expect to get if only Israel froze settlement growth?  Could it be that the policy people around Obama actually believe a resolution of the Israeli Palestinian conflict is within reach if only settlement activity were totally frozen?  I have trouble believing this level of naïveté exists in the Administration, given the number of people who have been involved in failed peace processing efforts over the last few decades.


I think the real key to understanding the policy shift is the linkage the Administration has laid out between Israeli Palestinian negotiations (which the Administration is arguing depends  almost exclusively on an Israeli halt to settlement activity) and the effort to prevent Iran from becoming a nuclear power. It is my belief that the Obama team has thrown in the towel on stopping Iran from getting nuclear weapons. Obama will never use military force for this, and the Administration’s new engagement approach seems to have been developed as if we had all the time in the world to reach an agreement with Iran.  


So in order to provide an excuse for the Administration’s failure to stop Iran, they will make Israel the reason for this happening– Israel refused to stop settlement activity. The Palestinians were then unable to reach a deal with Israel. And US allies in the Arab world world, and in Europe as well as Russia and China, were then unwilling to pressure Iran with stepped up sanctions to stop its nuclear program. So it is all Israel’s fault.  


The Obama team can then hope for the Israelis to be disgusted enough with the poor state of Israel’s relations with the US and Iran’s new nuclear reality that they throw Netanyahu out of office. Then a more compliant Israeli prime minister can take over, and give away the West Bank to the PA for nothing.  


What is particularly disgusting is that two court Jews in the administration — Rahm Emanuel and David Axelrod — appear to be the primary forces encouraging Obama to stick it to Israel  . They have calculated that American Jews are so blindly liberal, and in rapture to the almighty Obama that Obama can push Israel around without doing damage to his standing in the Jewish community.


Sadly they may be right in their assessment. Where are the major Jewish organizations to push back? Where are the Jewish Democrats in the Senate and House challenging a President of their own party when he sells out Israel?  I guess that would require a spine.


It is also sad to see Hillary Clinton, who many of us thought would be much better on US Israel relations than Obama during the campaign last year, turning into the loyal warrior for Obama on this initiative, knifing Israel at every opportunity.  She has gone back to the future, and we can see her again hugging and kissing Suha Arafat after the Palestinian first lady trashed Israel in a speech Clinton attended years back. It was easy for her to play the über Zionist as a Senator in New York, and in her need to corral Jewish campaign cash for her failed Presidential run. Her loyalty to the US Israel relationship is as thin now as it was in the early 90s. 


There is a fourth possibility — that Obama simply wants to be loved by the Muslim masses around the globe. He has determined that separating the US from its long historic close friendship with Israel is a small price to pay to achieve this.  It is frightening to consider that the current policy shift might be occurring for narcissistic reasons and not strategic ones. Frank Gaffney suggests that there may be something to this argument, in that Obama is transforming himself into America’s first Muslim President, much as Bill Clinton was hailed as the first black one.


Regrettably for Israel, none of this is a laughing matter.

Richard Baehr is cheif political correspondent of American Thinker.
Page Printed from: at June 10, 2009 – 12:17:13 PM EDT


By: Vasko Kohlmayer
Wednesday, June 10, 2009


As Obama chides the health care and automotive industries to cut costs, his budget-busting deficits reach record levels.
Yesterday, the president called on Congress to implement Pay-As-You-Go budgeting, as he did during the 2008 campaign and Democratic Congressmen promised to do during the 2006 campaign. “The pay-as-you-go rule is very simple,” Obama said. “Congress can only spend a dollar if it saves a dollar elsewhere.” However to date, the only people tightening their belts are the industries he is strong-arming.

In his latest weekly radio address, which focused on health  care, President Obama said, “A few weeks ago, some of these improbable allies committed to cut national health care spending by two trillion dollars over the next decade.” That $2 trillion “commitment” was obtained in a meeting that took place at the White House last month. Convened by the president, it featured top players in the healthcare industry who were invited to account for their spending practices and then asked to come up with ways to cut costs. At the summit’s conclusion, the president proudly announced that those present made a “voluntary” commitment to $2 trillion in spending reductions by 2019. 

Later on, however, it emerged that the commitment was not entirely voluntary, as the participants were arm-twisted by administration officials into making their pledge. In any event, most of them do not think that they will be able to honor it in the end. Senator Chuck Grassley of Iowa described the vow as “fairy dust.” 

The futility of this particular exercise notwithstanding, the president’s effort deserves close attention, because it is part of a recurring pattern. That pattern unfolds in the following manner. Obama summons top representatives of a major industry and tells them that their spending and expenses are unsustainably high. He declares this unacceptable and then orders that significant cuts be made. In the process, the president goes as far as to point out specific items which he personally deems unnecessary and wasteful. Some of the things that have drawn his criticism so far include the use of private jets, office refurbishments, and client hospitality functions. This attention to detail is meant to be the practical outworking of Obama’s often-repeated conviction that in this time of economic hardship we all need to tighten our belts. 

But the president’s words and actions beg the question: Why doesn’t he do the same? While Obama berates everyone else for their “excessive,” “unsustainable,” and “wasteful” costs, the federal government has under his direction embarked on an unprecedented spending extravaganza.

Consider these numbers. In less than a hundred days, he managed to open the largest budget deficit in American history. The $787 billion stimulus package he signed into law in February of this year is by far the largest spending bill ever. Described as “mammoth” by the media, this amount far exceeds any single bill of FDR even with inflation factored in. Christina Romer, Obama’s close associate and chairman of the Council of Economic Advisers, boasted that the bill is “is a completely different animal in terms of size” from anything that has ever been tried before. 

Worse yet, the stimulus package was ridden with pork. The final version of the bill, for example, included $225 million for “grants for violence against women prevention and prosecution programs.” One can only wonder how a quarter of a billion dollars spent on this kind of program will help the economy. The vast array of questionable items included $2.5 billion for “research and development of renewable and efficient energy technology,” $4 billion for “loan guarantees for standard renewables” and $85 million for “Indian Health Services IT development and deployment.” Very little in the stimulus package was directed to stimulate the country’s engine of jobs and prosperity – private enterprise. Most of it will go instead toward expanding government and paying off the president’s leftwing constituencies and liberal interests groups. According to a recent analysis by Matthew Vadum, senior editor at Capital Research Center, ACORN – the radical community organizing group that has been indicted or convicted of voter fraud in seventeen states – could be eligible for $8.5 billion of stimulus money. 

According to its latest estimate issued in March, the Congressional Budget Office (CBO) projects that this year’s deficit will reach some $1.85 trillion. This is the biggest deficit ever, exceeding the previous record set in 2008 by a factor of four. Even though George W. Bush was something of a careless spender himself, Barack Obama makes him look like a model of fiscal sobriety. In a sign of how far things have gone, six months ago deficits of $1 trillion seemed unthinkable. Barely half a year into the Obama administration, they are already accepted as par for the course. To make the outlook even bleaker, the CBO’s March projections were based on optimistic assumptions. With the economy slower, unemployment higher and tax receipts lower than what the CBO had forecast, it now seems inevitable that the deficit will exceed $2 trillion by the end of this fiscal year. We can expect this to be confirmed when the regular monthly update is issued early in July. 

Revising the deficit upward has recently been something of a habit with the CBO. Earlier this year it put it at $1.2 trillion, then at $1.6 trillion, and finally at the current $1.85 trillion. Some experts predict that the budget shortfall will reach $2.5 trillion this year. Given the unparalleled spending propensities of this administration, they may well be right. It is hard to believe that in the course of a mere twelve months, the deficit will have shot past two previously-undreamed of landmarks – one and two trillion dollars. This is truly a historic achievement, but not the kind that is conducive to the economic and fiscal well-being of this country. 

By current CBO’s estimates Obama’s deficits will add some $10 trillion to our national debt in the next decade, nearly doubling it. This number, however, will also be revised upwards once the new deficit figures are factored in. Dreary as these figures are, things are likely to be worse. This is because the CBO calculations do not take into account the costs of some of the president’s most ambitious programs such as health care reform. Providing universal health insurance would effectively create the most far-reaching entitlement program in American history. The administration puts its cost at some $1.2 trillion over the next decade. Most experts, however, dismiss this figure as grossly understated. It is only enough to look at the exploding costs of Social Security and other entitlements to see how profoundly unrealistic the administration’s numbers are. But even if we take Obama’s estimate at face value, the resulting national debt would by 2019 stand at more than twice the level he inherited when he took the oath of office. 

By far the most profligate president in this nation’s history, Obama’s spending extravaganza is made especially indefensible by the fact that he is using the money we do not have. Under his direction, the federal government has been borrowing almost fifty cents out of every dollar it spends. The president has repeatedly told us that he wants to lead by example. Cutting federal spending by the same amount he required of the healthcare industry – $2 trillion – would be a good start. The savings could surely be found, since Obama has himself publicly complained of government waste. So far the president has been asking everyone else to make sacrifices. Perhaps the time has come for him to do the same.