The 2011 discussion: bailouts and union jobs
The GM bailout enters the program on 2011-07-30, in a conversation between host Bob Zadek and Don Boudreaux, identified as a professor of economics at George Mason University and author of the blog Cafe Hayek. Zadek opens by recounting a television appearance by Jennifer Granholm, described as the former two-term governor of Michigan, who he says presided over one of the largest tax increases in any state’s history. Zadek says Granholm complained that the GM bailout and the Chrysler bailout caused a loss of jobs, and suggested those jobs left Michigan for overseas. Zadek disputes the account, saying the jobs were lost to Tennessee, Alabama, and states in the South with right-to-work laws, and that the number of jobs the auto industry lost would have been de minimis. In Zadek’s framing, the bailouts were an attempt to save union jobs rather than jobs, creating more union jobs at the expense of non-union jobs. The Second American Revolution – NOW (2011)
Boudreaux’s reply does not address the bailout directly. He says he has never seen or heard a politician accept blame for anything, except for being a poor campaigner, and that politicians always blame other people — which he offers as context for the gall politicians show when they point fingers at businessmen. The Second American Revolution – NOW (2011)
The 2012 discussion: bankruptcy law and legal equality
The bailout returns on 2012-10-27, in a conversation with Tom G. Palmer on the morality of capitalism. Palmer’s earlier remarks in the episode lay out the legal foundation he considers necessary for free-market capitalism: rule of law, well-defined property rights that are legally secured, and the ability to transact at relatively low cost. He contrasts this with poor countries where property rights are not well-defined, the legal system or police do not work, and the government is typically the biggest robber and predator around. He also invokes Joseph Schumpeter’s phrase “creative destruction” to describe capitalism’s constant introduction of new products, ways of doing business, and organizations. The Morality of Capitalism (2012)
After a break, Zadek turns to what he calls the erosion of the rule of law and property rights over the preceding four years. He cites the GM bailout as an example: the government, he says, stepped all over the rights of creditors of General Motors, took charge of the bankruptcy case, and destroyed the creditors’ property rights to favor another constituency — the UAW and the other unions who would otherwise lose from the bankruptcy. Zadek says the government threw aside the vested property rights of creditors in favor of their pals in Congress. He pairs this with the EPA, which he says is given broad powers of confiscation of private property over wetlands or alleged wetlands, and warns that as property rights are destroyed, the whole economic system is called into question. The Morality of Capitalism (2012)
Palmer agrees and goes further, calling the General Motors case an example of egregious corruption — authentic, real corruption. In his account, the government overrode settled and established bankruptcy laws and eliminated the rights of the creditors to the company in order to hand out goodies to their buddies; he calls it real cronyism and shameful. He generalizes from there to bailouts of big companies cozy with the White House or with members of Congress, noting that this happens on both sides of the aisle, not just Democrats or Republicans. As a further example he cites the Solyndra case, saying the president’s good buddy, who was his primary fundraiser, ended up getting over $600 million in loan guarantees, and that this was pushed through so the vice president could be photographed cutting ribbons at the factory despite warnings that the company did not look like it would survive. Palmer calls these violations of fundamental property rights and of legal equality before the law. The Morality of Capitalism (2012)
The 2014 reference
On 2014-03-30, Zadek interviews Burton Abrams about his book on the worst ten economic mistakes of the 20th century. In the closing section, Zadek lists what he calls the book’s pure libertarianism: the rule of law, well-defined property rights, good rules for the central bank, economic freedom, and getting rid of money in politics. He then groups the GM bailout with the abrogation of mortgage obligations during the so-called subprime mortgage crisis as complaints that the rule of law was lost, well-defined property rights were surrendered, the central bank behaved very badly, and economic freedom is being deprived. Zadek’s point is that the lessons and mistakes in the book are still happening today. Abrams does not take up the bailout in his reply; he says Zadek has said it all and expresses hope that people read the book. Worst Ten Economic Mistakes of the 20th Century (2014)
Across episodes
The topic appears in three episodes. In 2011, Zadek frames the bailout around jobs and union labor, with Boudreaux responding only about politicians’ refusal to accept blame. In 2012, the framing shifts to bankruptcy law, creditors’ property rights, and legal equality, with Palmer calling the GM case egregious corruption and adding Solyndra as a parallel. In 2014, Zadek folds the bailout into a list of rule-of-law failures alongside the mortgage crisis, but Abrams does not develop the point. The later treatments are more explicitly about property rights and cronyism than the 2011 discussion, and Palmer supplies the strongest language; the excerpts show no disagreement among the speakers about the bailout itself.
What the sources do not cover
The excerpts do not state the terms of the GM bankruptcy, the identity of the creditors, the role of any court, or the statutory basis for the government’s actions. They do not give the size of the bailout, the number of jobs involved, or the outcome for GM or the UAW. Granholm’s remarks are reported by Zadek rather than quoted from the broadcast, and no guest responds to the specific job-loss claim. The Solyndra figure and the mortgage-crisis reference appear only as asides, without further detail.