Power & Market

Lee Iacocca: American Crony "Capitalist"

Few people who write for the news media — most of whom have only ever studied journalism or "mass communications" — know much about markets or entrepreneurship. Thus, it's not difficult to understand by people who are not entrepreneurs or capitalists get labeled at such in newspapers and on TV news shows.

When George Steinbrenner died, for example, he was hailed in the media as a great entrepreneur and capitalist. In reality, Steinbrenner was a con artist and a tax mooch. His "entrepreneurship" consisted mostly of fleecing working-class taxpayers to pay for his luxury stadiums.

And now, with the death of Lee Iacocca, we see a similar phenomenon. Within the many tribute articles about Iococca, he is commonly called the "savior" of the auto industry, or as Car and Driver describes him "the face of American capitalism."

In truth, it was the American taxpayer who "saved" Chrysler, not Iacooca. And thanks to Iacocca, the taxpayer did so against his will since Iacocca was an expert at leveraging the coercive power of government to make others pay for his corporate schemes.

Back in 1985, when Iacocca was being hailed as a capitalist extraordinaire, James Bovard, in typical Bovardian fashion, threw cold water on the nation's celebration of faux capitalism:

Iacocca is so popular largely because of his reputation for taking Chrysler from the brink of bankruptcy to the heights of profitability. But Chrysler is raking in the billions now not because it is making better cars, but because Iacocca and others persuaded Uncle Sam to prohibit Americans from buying more better-made Japanese autos.

Iacocca brags that the 1979 government bailout of Chrysler was a huge success, and even says federal loan guarantees are “as American as apple pie.” But since 1978, Chrysler has laid off more than a quarter of its workers and shut down 21 factories. A bailout intended to save jobs still resulted in tens of thousands of Chrysler workers losing their paychecks.

Iacocca even tried to cheat the government on the bailout deal. To cover the government’s risk in guaranteeing a $1.2 billion loan to a bankrupt corporation, Chrysler gave the Treasury Department warrants to buy 14 million shares of Chrysler stock at $14 a share. At the time of the bailout, Chrysler was trading at $7 a share; a few years later, thanks largely to the bailout and import quotas, Chrysler stock was up to $27 a share. When the Treasury announced it would cash in the warrants and collect a few hundred million dollars for taxpayers, Iacocca raised hell and tried to welch on the bargain. Iacocca whined, “That kind of profit is almost indecent….” Even though Chrysler has made billion thanks to government protection, Iacocca still tried to avoid paying Uncle Sam a single penny.

Iacocca wants the entire economy restricted, squeezed, and bled in order to benefit Chrysler. Iacocca tried to block the GM-Toyota joint effort to produce small cars in California, saying the partnership would be terrible for the auto industry. But at the same time Iacocca was doing his “Chicken Little” routine, Chrysler was already colluding with Mitsubishi, selling tens of thousands of their cars in the U.S.

Iacocca is America’s leading Jap-basher. Iacocca sweats that the Japanese “want to rape the market” and that “We’re a colony again, this time of Japan.” When Iacocca gave a speech on Dec. 7 on Japanese imports, he reminded his audience that it was a “day of infamy,” invoking Pearl Harbor and trying to stir up hatred for a valuable ally. Congressman Robert Matsui, D-Calif., derided recent Iacocca remarks as “racist.”

But it is understandable that Iacocca would seize every chance to slur Japan. Japanese car makers are still putting his company to shame.

Thanks to Iacocca, real American entrepreneurs — i.e., not welfare queens like the execs at Chrysler — had to pay much more for automobiles and auto parts, while paying taxes to bailout a huge corporation. Many also had to settle for lower-quality American cars.

But few seemed to care because then — as now — many Americans can't think through the implications of trade barriers and government bailouts. They don't notice the widespread unseen costs of protectionist trade barriers paid by consumers and entrepreneurs throughout the economy. All that really matters, in the minds of politicians and gullible taxpayers, is that Iacooca "saved Chrysler" and stuck it to those Japanese who think we're "lazy."

Of course, all that was before the 2008 financial crisis when it became the norm to bailout banks and auto companies, and when George W. Bush declared "I’ve abandoned free market principles to save the free market system."

Iacocca could have easily uttered those words himself. He was well versed in destroying competition, limiting choice, and sticking it to the taxpayer in the name of American big business.

There's no doubt Iacocca was a savvy businessman and a great lobbyist. But don't confuse what he was doing with entrepreneurship or capitalism.

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