The Simple Facts of General Motors

When Bill Durant decided to organize General Motors in 1908 he created the company for one reason: He saw an opportunity to profit, and seized it. There is nothing wrong with pursuing profit, in fact that is the reason why businesses exist, but somehow unions like United Auto Workers (UAW) and the government seem to have lost sight of this fact. For years the UAW (with the help of the government) have dug the hole where GM lies, and now they claim they had nothing to do with it. The truth is exactly the opposite, with the negotiation of ridiculous labor contracts, fixing minimum wages, and outrageous benefit plans, UAW and the government have absolutely everything to do with getting GM to where it is today. By forcing GM to incur in these types of obligations they force them to shift the efficient allocation of resources. Instead of investing in better designs, alternative fuels, or better technologies GM was dealing with contracts, unions, and regulations. The government and Unions lost sight of the fact that jobs are created as a consequence rather than the purpose of a business.

The problems we see today in GM came from shifting the perspective, and instead of regarding it as a profit seeking business, they saw GM as major employer, regulating and guarding the workers as if it was the main purpose of the firm. Under free market conditions the efficient allocation of resources will result in profits, and the employer will keep the most efficient workers by rewarding them with better salaries and benefits. But when government or unions force employers into conditions that shift the most efficient allocation the results are chaotic. It is not the mean selfish business man that took GM to the position where it has to lay off 30,0000 workers to remain in the business, it was the noble unions and the supportive government, the so called victims, the ones that forced GM to this situation.