US government enters the car business


altIt appears that President Obama’s plea to buy American was not just an appeal to the conscience of the US consumer; it was actually a sales pitch. When he announced the American government’s acquisition of a 60-percent stake in automotive giant General Motors, Obama took on a new title, Car-Salesman-in-Chief. In addition to democracy and the war on terror, America will now be pushing Corvettes and Cadillacs on the world.

Obvious conflict of interest questions arise from this new venture, which in turn lead to concerns about fairness in the marketplace. Automobile manufacturers will undoubtedly be vigilant in watching for instances of undue influence and market manipulation now the US government has a direct financial interest in the industry. Toyota and Volkswagen cannot be thrilled that the same entity that sets US trade policies is now the majority shareholder in their largest American rival.

The Obama administration insists that it will play the role of passive investor with GM—for example, no government employees will be employed by a company in which the government has invested or sit on such a company’s board. Limiting benefits to individuals is one thing, but will the government be able to resist the temptation to help its investment by tweaking a policy here or relaxing a rule there? It seems unlikely that a market can be free or fair when the market regulator becomes a market player. If the skeptics prove correct, it may not be long until the iconic Uncle Sam abandons his legendary call “I want you for U.S. Army" for the shameless plug “I want you to buy a Chevy."