# LR Editorials (Feb. 1981) **URL:** **Published:** February 1, 1981 --- “The plain fact is that Chrysler is bankrupt and is only staving off the inevitable.” ## Chrysler sings the blues The Chrysler Corporation broke its own record last year, racking up losses of more than $1.7 billion — the greatest loss in corporate history, a full half-billion dollars more than it lost during its previous record year, 1979. And Chrysler’s glib-tongued chairman, Lee Iacocca, who has been seen throughout the past year on television alternately begging for government money and bragging about the “new” Chrysler Corporation, was on television again December 17 to unveil yet another cost-cutting plan, another plan for aggressive marketing of Chrysler’s newest automobiles, and another plan for another government bailout — this time by a whopping $400 million. The plain fact is that Chrysler is bankrupt and is only staving off the inevitable. At his news conference on December 17, Iacocca admitted that his earlier predictions of a modest fourth-quarter profit for 1980 had been way off-base, and that the sad truth was that Chrysler would lose more than $200 million during the last three months of the year. When he was asked what would happen if the federal government didn’t come through with the $400 million loan guarantee by mid-January, he responded that “There would be no future. Eventually, we would run out of cash.” And then he unveiled his latest cost-cutting plan, which—to put it mildly—rests on a host of assumptions. As reported in _The New York Times_, the company says the plan “would cut about $650 million from operating expenses in the first year, and more than $1 billion in the next 20 months, \[and\] envisions a return to profitability sometime next year.... The new strategy... rests on the assumption that Chrysler can capture 9 percent of the domestic market in the 1981 model year when it expects total American car sales, by all United States auto manufacturers, to reach 9.6 million units. Domestic sales now are running at a rate of only 7 to 8 million units annually.” (December 18) Iacocca also assumes: (1) that his employees are going to accept a 21 month wage freeze, at an average $17.31 an hour, junking automatic cost-of-living increases, designed to save the company $600 million; (2) that the 125 banks with which Chrysler deals will grant his desperate plea that they convert $572 million in loans to preferred stock, saving the company $100 million in interest payments in 1981; (3) that his suppliers will grant him another desperate plea, this one to freeze prices for 1981, and even roll them back 5 percent for the first quarter; and (4) that he’ll be able to lay off 1250 white-collar workers and get all Chrysler departments to cut expenses by 5 percent. All of this is starkly unrealistic. With the prime rate having reached an astonishing 21 percent, it is absurd to assume that sales of new cars will increase by 20 percent or more during 1981, irresponsible to assume that banks would convert loans into “preferred stock” of a near-bankrupt company, and equally foolish during rampant inflation, to expect suppliers to cut their prices a full five percent, particularly when some among them, notably the steel companies, are having grave financial difficulties of their own. Iacocca may be able to cut costs by 5 percent across the board, lay off more than a thousand white-collar workers, and even persuade its workers to take what amounts to pay a cut. But that will simply not be enough. What, then, is Chrysler to do? Iacocca’s strategy thus far has been to propose a host of steps to turn Chrysler around, based on projections which are unrealistic, and then, when the house of cards threatens to collapse, go back to the federal government for a bailout. And rather than risk the unmentionable, namely bankruptcy for the corporation, the feds seem to be willing to play the game. Reagan’s administration, unfortunately, will probably be no different. As he assumes office, Reagan seems likely to follow the urging of Congressmen David Stockman and Jack Kemp in their 23-page December memorandum urging that the President declare an “economic emergency” and move quickly with key measures designed to turn the country around. Otherwise, they asserted, the country would face an “economic Dunkirk.” They urged on Reagan a 100-day “Emergency Economic Stabilization and Recovery Program,” to stimulate productivity, lessen the “credit crunch,” and slash tax rates through Kemp-Roth. And they are quite aware that the “100 days” of quick, decisive action is directly patterned after the opening months of Franklin Roosevelt’s administration during the Depression. The problem is that Reagan may end up emulating Roosevelt in substance, as well. Roosevelt promised, during his 1932 campaign for the Presidency, to cut the size of government drastically and ended up, of course, doing precisely the reverse. Reagan also campaigned against “big government”—a government more than a hundred times as large as that Roosevelt inherited—but his selection of mainstream, moderate Republicans for his cabinet, and his continued waffling on crucial issues, bodes ill for the future. Donald Regan, designated in December as Secretary of the Treasury, is a former supporter of wage and price controls. Alexander Haig is a big-spender on “defense.” Senator Richard Schweiker, designated as Secretary of HEW’s successor, the Department of Health and Human Services, was a principal architect of many of the social welfare programs with which we have recently been shackled. And during the campaign, we should remember, Reagan waffled on farm subsidies, national health insurance, the New York City bailout, the Chrysler bailout, the TVA, and a host of other programs which he had, in the 1960s, been staunchly against. Speaking realistically rather than rhetorically, if recession continues through 1981, Chrysler is not the only company which will be hurt. Nor is it the only company which will face bankruptcy. What will Reagan do? Will he follow through with his free market rhetoric and let these firms go under, thus hurting the Republicans’s chances in the 1982 congressional elections? Or will he become “Mr. Bailout”—in the name of “reindustrialization” and the “economic emergency” which his advisors see emerging? Judging by his performance in the Chrysler case, the odds are that Reagan will adopt bailouts, and with a vengeance. On December 16, under the headline “Chrysler Aid Linked to Reagan’s Assent,” _The New York Times_ reported that Treasury Secretary G. William Miller “was willing to issue additional loan guarantees sought by the Chrysler Corporation if there was a concurring nod from the incoming administration of President-elect Reagan.” Two days later, the _Times_ reported that Reagan had given the nod. A harbinger of things to come? Probably—but it is also bad economic medicine. Bankruptcy is the penalty companies pay for making consistently wrong entrepreneurial decisions about investments and sales. Chrysler has been guilty of such bad decisions for the better part of the past decade, and shows no signs of improving its judgment in the near future. What ought to be done is simply to let Chrysler go broke. This would not have the dire economic consequences which have been predicted. What would most probably happen is that Chrysler’s assets would go up for sale, and would be snapped up by Japanese or German firms eager to penetrate the American market more than they have. And that should be welcomed, for the influx of foreign capital is precisely what the ailing American economy could use more of, not less. Nor would Chrysler’s workers be harmed. They are skilled at producing precisely what Japanese or German auto manufacturers want to produce and, after a layoff of a few months, would probably be rehired to do precisely what they have been doing. The unwillingness of recent administrations to let big companies go bankrupt is very bad economics. During the early 1920s, there was a severe recession in the U.S., and the government did virtually nothing to prevent or soften the resulting economic adjustments. The result was that the recession lasted only a few months. After the Depression hit in 1929, Hoover and Roosevelt took the opposite path: they intervened massively by propping up failing businesses, and thus caused the Depression to last for the better part of a decade. The reason for this is simple: recession or depression is the means of liquidating malin-vestments made during an artificially stimulated boom of the sort we have been living under for the past few decades. Unless those mal-investments are liquidated, and capital is freed to flow into productive areas, the economy cannot recover its vitality. Odd as it may seem, bankruptcy can be a blessing, not a curse. This is precisely the case with Chrysler. It has invested capital badly, continually made wrong guesses about the economy and the demand for its products, and now wants to divert more precious capital into its corporate rat hole. If private investors want to take a risk on Iacocca’s latest guesses, let them—but at their own expense, without the backing of the American taxpayer who is already overburdened with so many other government-sanctioned lemons. —Roy A. Childs, Jr. ## Lennon: what is to be done News of John Lennon’s death December 8 hit hard. The assassination of the Beatles’ singer-songwriter, probably the most creative of the four, inspired thousands of radio stations to cast aside their regular programming that night and play one Beatles tune after another. Much of the Western world entered into an extended period of mourning via the electronic and other media. Newspapers nursed along the story for nearly a week, with retrospective articles on every facet of John Lennon’s life and work. In New York, 500,000 were said to have gathered on the day of the funeral to pay tribute to him. Even so established an institution as the Boston Pops Orchestra delivered an orchestral tribute to the slain Beatle. Lennon’s murder provoked such a tremendous upsurge of grief and reminiscence partly because his fans belong to the baby boom generation, that great bulge in the demographic charts that occurred between 1946 and 1964. Suddenly, one of this generation’s universal images of its own past had been blotted out by a senseless murder. For those of us who belong to the baby boom bulge, John Lennon and the Beatles have always held a special significance — perhaps because the Beatles’ evolution as artists always seemed to exactly reflect the development of our entire generation. When we were simple teenagers with transistor radios the Beatles were cute, upbeat rockers who produced 2 minute 15 second classics like “I Wanna Hold Your Hand.” When the Beatles were starting to take themselves more seriously, so were we. When they entered their psychedelic phase, all of us seemed caught up in a climate of restless intellectual, political, sexual, and pharmaceutical experimentation. The Beatles’ final slide into mysticism and religion seemed to prefigure the decline of the counterculture and the anti-war movement (and suggested the cause of the decline: their restless individualism and creativity had always lacked any commitment to reason); concern with exploring and improving the self seemed to replace politics and music as the generation’s concern. After his two-month fling with the Maharishi, Lennon turned to Arthur Janov and “primal scream” therapy. Yoko Ono looked into est. The rest of the culture manifested its new preoccupation in everything from holistic health to hot tubs. But it was family life wherein Lennon and his mate Yoko Ono demonstrated that the cultural pioneering of the baby boom generation is far from over. As revealed by a fascinating interview in _Playboy_ Magazine, Lennon withdrew from public life in 1975 to raise a child, and in the process he deliberately entered into a role reversal with Ono. Yoko Ono made millions of dollars running the family business while Lennon stayed home, baked bread, and took care of the child, Sean. By winning for themselves the freedom to step outside of conventional roles to better pursue their own values, Lennon and Ono struck another blow for the liberating individualism unleashed in the Sixties. Politics, too, played a central role in the parallel development of the Beatles and the postwar generation. Part of the experience of any young person immersed in the youth culture of the Sixties was official disapproval, sometimes even violent repression. The emergence of a self-conscious counterculture created a competition of _values_ in Western society, and in that competition young people soon learned that their parents had the state on their side. Libertarians should have no trouble understanding that in modern society, the free market encompasses competition not only among material goods and services, but also among ideas and values. Today, people discuss and choose among “lifestyles”—that is, a set of personal values—in much the same manner as they choose the better of various competing products. In the Sixties, battles were fought over religion and sex, over materialism (which was often misidentified as “capitalism”), and over the acceptability of violence and war. The competition between the old values and the new was constantly expressed through the choices people made on the market: choices of records and clothing, media heroes, books, vehicles, and recreational drugs. It is a fact of tremendous significance, even today, that in the Sixties the free market of values and goods made John Lennon into a wealthy superstar—but the government of this country tried to make him into a criminal and an outcast. John Lennon and Yoko Ono were forced to surmount a legal blockade thrown up by the authorities simply to be permitted to live in New York City. Fellow Beatle Paul McCartney, when he arrived in Japan, was seized and imprisoned because he was found to be in possession (along with millions of others his age) of marijuana. No one can pretend that Lennon and McCartney were treated this way because they personally posed a threat to the people of either country. Rather, the harassment was part of a distinctly cultural conflict, a contest of values and lifestyles waged between two generations. One indication of the final outcome of that conflict was the respectful and thorough news coverage—often bordering on the fawning or the blatantly commercial—granted to Lennon’s life and work after his murder. Even David Brinkley, who ten years ago probably viewed Lennon and Ono as an unrespectable and rather threatening pair, appeared on NBC TV to grieve over the death, as he put, of “the composer of all those wonderful songs.” I wonder— does David Brinkley really go home and listen to Beatles records? Regardless, the death of John Lennon, figurehead of the once-outcast youth culture, rated media treatment more extensive and more respectful than would the death of any Senator or Congressman. In fact, the murder was treated on literally the same scale as the assassination of a President. Obviously, the people who now write, deliver, and listen to the news are dominated by the age group which looked to the Beatles for inspiration in the Sixties and Seventies. And the influence it has gained over the media represents what will likely go on in the rest of society. Its values and interests will seep into and ultimately dominate each institution its members enter, including government. Thus it is important to ask: what does Lennon’s generation plan to do with the society which it is inheriting? Only a few months before he was shot, John Lennon had decided to re-enter public life with Yoko Ono. They cut a new album and granted interviews to _Newsweek_ and _Playboy_. Lennon’s stirrings prompted speculation, voiced by the _Playboy_ interviewer, that “just as Lennon defined the Sixties and the Seventies, he’ll be defining the Eighties.” But Lennon’s own comments show that he came to a solidly libertarian conclusion about the idolatry and the “follow the leader” ethic which often warped youth culture in the past: > “We can have figureheads and people we admire \[he said in the _Playboy_ interview\] but we don’t need leaders... you make your own dream. That’s the Beatles story, isn’t it? That’s Yoko’s story. Don’t expect Jimmy Carter or Ronald Reagan or John Lennon or Yoko Ono or Bob Dylan or Jesus Christ to come and do it for you. You have to do it yourself.” Sound advice, after a decade of maharishis, psychologist-gurus, and rock stars turning into born-again Christians. In Lennon’s case, all it lacked was a recognition that the use of reason is the only peaceful way people can define their separate dreams and decide for themselves how far to follow specific leaders. In the next decade, the baby boom generation will move to the brink of becoming the establishment. It must therefore face some tough choices... and some unprecedented opportunities. Even though it has stopped trying, the postwar generation still has the strength to alter the course of this nation and the world; it did so once, and it is in a much better position to do so now than when its members were rioting on campus in little, isolated enclaves of radicalism. The surge of grief which issued forth from the entire culture upon Lennon’s death made us aware once again of the latent power of this group — and the breadth of its integration into the mainstream of American life. It also posed a question: will the baby boom generation remember that the political system under which its members were reared once made them into angry rebels, and their heroes, like John Lennon, into criminals? And if it remembers, will its members renew their drive to overturn those elements of the system which so stunted and embittered their own development: the drug prohibition, the public schools, the racism and sexism, and the global empire? Or will they, along with their elders, listlessly slide into the Reagan syndrome and stop trying to effect change? The abrupt death of Lennon, just as he embarked on a new career, leaves that question hanging before us in symbolic form. Born in 1940, dead by 1980, Lennon’s dates take us from World War II to the immediate present in simple, round numbers. What next? —Milton Mueller ## Cultural inventories Civil liberties and economic freedom are equally necessary aspects of human liberty, and ought to be considered interchange-ably. As Jack Shafer said in these pages last month, “political rights dissolve into nothing in the absence of economic rights.” And as I wrote in another article for _LR_ in 1978, “Freedom of speech is the basic freedom of the individual to think for him or herself and to communicate that thought, and freedom of the press is the right to merchandize the result of that thinking.” It’s clear that you can’t allow people freedom of expression without allowing them to own and use physical objects. But if people’s free use of printing presses and newspaper delivery trucks shouldn’t be curtailed in a society that supposedly respects individual rights, what about the free use of the drill presses and grocery delivery trucks they may also own? Unfortunately, such considerations don’t seem to occur to many civil libertarians. Consider the recent dispute over the tax depreciation of manufacturers’ inventories. The Thor Power Tool Company tried unsuccessfully in 1979 to challenge in the Supreme Court an IRS ruling that warehouse stock could no longer be depreciated unless its price was reduced or it was disposed of. This caused consternation among the members of many industries who had been in the habit of routinely depreciating such stock. It caused particular consternation because the IRS took a year to implement the Supreme Court decision with specific rulings, and then decided to apply these rulings retroactively. But not much publicity was given to this decision until the IRS included in this retroactive ruling the determination that books are manufactured articles too, and therefore publishers not only owed their share of back taxes but would henceforth have to pay taxes on the full value of stored books or get rid of them. And that’s when the dispute arose. Newspaper editorials complained. Publishers and publishers’ associations complained. Political magazines complained. “Burning books for the IRS” headlined _Inquiry_. “Let the book industry be exempted from the ruling,” editorialized _The Nation_. Frantic attempts were made in Congress to do just that before the end of 1980, to save millions of books from being destroyed. One expert witness pointed out that scholarly, technical, and scientific works would be particularly hard hit; such books never have a mass market, but are indispensible to the individual who happens to need them. Without them, he stated, the country will be “economically and culturally poorer.” But why did no one say exactly the same thing about spare parts, which is what the original Thor case was about? A large spare parts inventory, like an inventory of scholarly books, will be very slow moving and will probably never sell out. But without it, our machines will stop running. And that will leave us economically and culturally poorer, too. —Joan Kennedy Taylor ## LR has moved... The Mainbusiness and editorial offices of _The Libertarian Review_ may now be found on Capitol Hill—just a few blocks from the Library of Congress, at 1320 G Street SE, Washington, D.C. 20003. Our West Coast office is now in the process of moving from 1620 Montgomery Street in San Francisco to smaller quarters elsewhere in the Bay Area (the new address will be announced in our March issue), where it will remain open as a branch editorial office. Subscription correspondence should continue to be directed to our San Diego address (P. O. Box 28816, San Diego, CA 92128). All other correspondence should be directed to Washington.