The Long Crisis

The US government has taken on two exceedingly difficult tasks in attempting to manage two interventions with the bankruptcy of GM and the expansion of the war in Afghanistan.

How well has the Obama team thought out the endgame for these tasks? Does the Obama team even have an endgame?

Philip Zelikow takes on this issue in an article written for ForeignPolicy.Com .

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The U.S. government is now bankrolling two substantial enterprises — both too important to fail.

One is the automobile company, General Motors. The U.S. government appears to be putting up a total approaching $50 billion to keep the reduced company afloat. It is set to own 60 percent of the company.

The other is the Islamic Republic of Afghanistan, a sovereign government in central Asia. Purely by financial measures, the U.S. investment there is not quite as large as in General Motors. But since the prospects of getting the money back are not as good, perhaps the level of federal spending in this case can be regarded as roughly comparable. The federal government does not have a formal ownership stake in Afghanistan, but foreign donors pay more than 90 percent of the costs of operating the government. The United States foots most of this bill — especially in security spending. And there is no prospect of Afghanistan being able to afford the security forces it has now, much less those proposed for it, any time in the foreseeable future.

Ordinarily a common description for the first case is that the company has been nationalized by the United States government. And a common description for the second case is that the state has become a protectorate of the power that pays for the army. (The United States does this in Afghanistan to a much greater degree than was ever the case in Israel, and to a much greater degree than was even the case in Iraq in recent years. In this respect, the proportion of U.S. sponsorship is a bit reminiscent of South Vietnam.)

The United States government does not like to use terms like “nationalization” or “protectorate.” Why? Because these descriptions would make it sound like the U.S. government is in charge. Well, isn’t it? In both cases, the answer is: Not quite. And in both cases the question is worth pressing a bit harder.

In the first case, GM, the U.S. government will own the company. But it will not offer or defend a business model for GM’s success, since we disclaim any desire to run this company. (Though the government will impose certain new constraints on how the company can be run.) The argument is that, with the massive subsidy and the freedom from old constraints that will come from bankruptcy reorganization, the company should do fine. But some big questions arise:

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For the remainder of the thought provoking article go to ForeignPolicy.Com

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