Sunday, April 12, 2009

Saving Detroit Is Proper Social Policy.

There is no doubt that under normal circumstances any business entity should sink or swim based on the efficacy of the managerial decisions that were taken by all its stakeholders, management, labour, suppliers and potential customers. But as is often the case no rule or principle should be applied blindly as if the same rigid and inflexible principles are to always be applied irrespective of extenuating circumstances. FASB 157 is a good example of the need for flexibility and adaptation to changing environments especially when the changes are sudden, unexpected and are believed to be of a transitory nature. Another example of the need for flexibility is the expansive monetary and fiscal policy that the present administration is embarked upon in an effort to steer the ship of state through these very troubled economic times.
But what is good for the goose is good for the gander. Most are aware of the arguments about why the financial system needs to become functional again and why it is that a trillion dollar deficit is the right economic policy at the moment. The rationale for the above rests on the notion that the “common good” requires the adoption of a socially responsible set of policies when the times call for such action. Unfortunately most of the politicians, power brokers and media outlets have neglected to apply the principle of socially responsible actions to an industry that is essential for the economy but that is neither glamorous nor led by eloquent spokespersons. Detroit has made more than its share of mistakes over the past three decades but it is an industry that is basic for a modern economy, it has played a major role is shaping the prosperity that the US enjoys. Detroit has already taken major steps towards restructuring its operation and revamping its product line. Actually most observers agree that Detroit has, at the moment, a very well conceived product line that can compete with any other in the world. That, however, will be of no benefit to anyone if Detroit runs short of the liquidity it so desperately needs until this current economic crisis is over. It is clear that since the quality of the product is not an issue but the only remaining obstacle is that of cash flow in the short run then it must be the duty, nay the obligation, of a responsible government to take the appropriate steps to give these firms the chance to sink or swim once these special economic circumstances are over. Detroit did not create or even contribute to the financial meltdown, it is essential for a manufacturing modern economy and it deserves a life line that does not include a trip to the bankruptcy court. The failure of Detroit, if it happens, will not be a reflection of wrong decisions over the years by its leadership but will go down in history as a reflection on the collective judgment of the entire society. Saving Detroit by extending the automotive companies the funds that they need is nothing short of an investment in the country it social cohesion and its future.

No comments:


Free Blog Counter