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Megan McArdle

Megan McArdle - Megan McArdle is a senior editor for The Atlantic who writes about business and economics. She has worked at three start-ups, a consulting firm, an investment bank, a disaster recovery firm at Ground Zero, and The Economist. More

Megan was born and raised on the Upper West Side of Manhattan, and yes, she does enjoy her lattes, as well as the occasional extra-dry skim-milk cappuccino. Her checkered work history includes three start-ups, four years as a technology project manager for a boutique consulting firm, a summer as an associate at an investment bank, and a year spent as sort of an executive copy girl for one of the disaster-recovery firms at Ground Zero … all before the age of 30.

While working at Ground Zero, Megan started Live From the WTC, a blog focused on economics, business, and cooking. She may or may not have been the first major economics blogger, depending on whether we are allowed to throw outlying variables such as Brad Delong out of the set. From there it was but a few steps down the slippery slope to freelance journalism. She has worked in various capacities for The Economist, where she wrote about economics and oversaw the founding of Free Exchange, the magazine's economics blog. She has also maintained her own blog, Asymmetrical Information, which moved to The Atlantic, along with its owner, in August 2007.

Megan holds a bachelor's degree in English literature from the University of Pennsylvania and an M.B.A. from the University of Chicago. After a lifetime as a New Yorker, she now resides in northwest Washington, D.C., where she is still trying to figure out what one does with an apartment larger than 400 square feet.

Invidious comparisons

By Megan McArdle
Nov 11 2008, 5:04 PM ET Comment

Why bail out Wall Street and not GM, demand many people.  Why do we care about bankers and not ordinary folks?

I think this misses the point of the financial bailout.  Whether or not it works--and I sure hope it will--I don't think very many people wanted to bail out the financial industry because we were so moved by the plight of those plucky traders on the mortgage desk.  We bailed them out not because they deserved it--they didn't--but because if we didn't, there was a very big risk that they would take us down with them.

This is not generalizeable to other industries.  Money is weird.  Finance is weird.  There is no other industry that is, first, so tightly coupled, and second, severely affects every other industry in the country.  Moreover, there are few other industries that are so vulnerable to panic.  Strategic injections of capital can actually salvage operations that are otherwise sound.

GM's operations are not otherwise sound.  They have been headed for this moment since 1973.  Conservatives blame legacy costs, and liberals blame management.  They're both right.  GM's legacy costs are crazy.  So is the UAW leadership, which, goaded by the retirees, is knowingly driving the company into bankruptcy rather than negotiate clearly unsustainable deals.  Those legacy costs would probably not be supportable by any company in a competitive environment; the UAW's expectations were created in an era of comfortable oligopoly, when all costs could be directly passed on to the consumer.  And the poor quality control on American cars is, from all reports, the responsibility of the union, which maintains downright silly work rules that not even the most ardent liberal could defend in both the Big Three and their various parts suppliers.  My favorite was the supplier plant that was forced to work in english measurement even though they had to sell parts in metric.  But the examples are legion.

But too, management doesn't seem to be trying much harder to keep themselves out of bankruptcy court.  The company could have limped on for longer if it had, y'know, made cars anyone wanted to buy.  That's not the UAW's fault.  GM's management seems to have a positive genius for making horrible cars, as if they'd deliberately sat down and asked themselves how they could best combine ugly, inconvenient, and unreliable into one expensive package.

What is government money going to fix?  Will GM's management be so grateful to America that they decide to make an attractive, reliable vehicle as a thank-you gift?  Will the unions realize that they owe the taxpayers a little more flexibility at collective bargaining time?  Oh, hear that hollow laugh.

Merging with Chrysler doesn't solve anything.  It's like two alcoholics deciding that they could maybe quit drinking if they got married.  Everything that's wrong with GM is wrong with Chrysler, in spades.  Adding the chaos and expense of a merger will not improve the toxic rot of horrible labor relations and muddled management.  They can't even save money in the traditional way, by streamlining operations, because it costs them so much to lay anyone off.  They'll save on steel and electricity from cutting car lines.  But they can cut those car lines right now.  And steel and electricity are no longer the major costs of auto manufacturing.

GM can't be saved.  It needs to go into bankruptcy, which is the only possible way I can see to adjust its legacy labor problems, and possibly provide sufficient shock to the corporate culture to allow the company to make a competent car.  Even that may not work.  And it's going to involve a whole bunch of pain for everyone.

But unless we're willing to essentially nationalize three auto companies, that pain is going to come, sooner or later.  And if we want to keep auto workers from feeling pain, then we should just up and give them money.  There's no reason to waste steel on a lot of crappy cars.


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