Getting what they had coming

GM is going broke because its managers wouldn’t support a national health insurance deal ten years ago.

It looks as if General Motors will be bankrupted by its health insurance obligations to retirees. That was predictable two decades ago.

It’s hard to see the end of GM as anything but a gain for the art of automotive design, but it will be rather inconvenient for the shareholders, not to mention the employees and retirees.

The astonishing thing about the story is the fact that GM management was offered a way out, and turned it down. The Clinton health plan was disfigured by the inclusion of a provision that would have relieved the industrial dinosaurs, including GM, of the burden of their imprudence in promising health benefits when they were large that they could no longer afford after downsizing. Everyone knew it was an unjustified giveaway, but the idea was to peel off the big manufacturing firms from the coalition of small businesses (which didn’t want to give up the competitive advantage they gained from chintzing on health coverage for their employees) and the health-insurance and health-care giants whose bread and butter was on the line.

But GM and the other big-business beneficiaries turned the deal down flat. Partly this reflected the threats of payback from the Republicans on the Hill against any firm that did business with the Clintons. Partly it reflected the self-interest of the corporate Human Resources bureaucrats, whose importance within their firms would have shrunk if health care was no longer a corporate problem. But in large part it reflected an almost Marxian expression of class solidarity over individual interests. GM’s managers decided that denying a triumph to a Democratic President was more important than keeping their own firm from going broke.

Yes, I know that companies don’t have personalities, and therefore can’t be punished. But it’s hard not to take some satisfaction from the knowledge that an organization which made such bad decisions won’t be around to make them much longer.

Update: A reader points to this Dave Lindorff item from Counterpunch, asserting that GM Canada lobbies for improvements in national health care in Canada by arguing that relieving companies of the health-care burden encourages investment and employment, while the parent company continues to oppose national health care here.

No, I don’t trust Counterpunch any more than you do, but I have no reason to doubt that Lindorff’s reporting is accurate. If you know of such a reason, please pass it along.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact: