The panic over government getting directly involved in running companies that can’t survive without federal support may be misguided. New York Times business reporter Louis Uchitelle makes this point, noting that

As General Motors and Chrysler struggle to remain solvent, the railroad bailout of a generation ago could offer a template to the Obama administration — one in which the federal government would run the auto companies until they are back on their feet.

That was a different age, of course. Congress was very much on board, supervising the reorganization of the bankrupt Northeastern railroads and then forming Conrail, in 1976, to run them. The auto companies, in contrast, are being pushed by the White House and Congress to reorganize themselves and remain private corporations, owned by shareholders.

Conrail presided over huge cutbacks in rail operations, leaving the railroad system with much less track and roughly half the number of employees. By 1981, it was turning a profit hauling freight, and eventually its operations were sold back to privately operated lines.

Five years after Conrail’s creation, Ronald Reagan became president and gave government takeovers a bad name by popularizing the view that government was inept in the marketplace. The Obama administration, respectful of this continuing view, wants the automakers to stand on their own, with only temporary federal loans to get them through the hard times.

Would be nice to see frequent, even regular, coverage of how government programs actually function. There’s no particular reason to believe that programs run by well-intentioned and well-trained public employees necessarily perform worse than those run by people driven to make decisions based on huge year-end bonuses, for example. The fear of being labeled “socialist” – and the rejection of government involvement even when there are few other options– is hardly rational or helpful. But members of the public have little understanding of the true efficacy of such programs.


  • Russ Baker

    Russ Baker is Editor-in-Chief of WhoWhatWhy. He is an award-winning investigative journalist who specializes in exploring power dynamics behind major events.

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