Dave Cloud is a high school economics and business law teacher in Pendleton, Indiana. He’s also a very clear-thinking guy, as he reacts to GM Chairman and CEO Richard Wagoner whine about the lack of a “level playing field” in the car business (”level playing field” translation: “We need some kind of direct or indirect bailout from the government to survive”):
The term is cliché, but it is an extremely misleading one. The sports analogy implies that everyone should be required to play by the same rules; that all competitors should have approximately the same equipment for the contest. Who could object to that? Well, anyone who understands that this is simply not how the world works.
If Mr. Wagoner is interested in a level playing field, he should take up tennis, football or some other sport in which the rules of the game decree equal access to resources. Business is not that way. But for that matter, neither is sport. Does anyone believe that when Tiger Woods is playing his best golf any other golfer playing his best game will win? Were the 1980 Soviet and U.S. Olympic hockey teams equally matched? We don’t refer to the U.S. victory as a miracle just for the heck of it.
Mr. Wagoner knows there is no such thing as a truly level playing field. Each competitor has distinct advantages and disadvantages. Sam Walton wasn’t competing on a level playing field when Wal-Mart first went up against discount king K-Mart. Tiny Microwave Communications, Inc. (MCI) wasn’t in a fair fight in 1969 when it began to offer long distance telephone service between Chicago and St. Louis, putting it in competition with mighty AT&T. Would we better off if these and other challengers had insisted on waiting until the odds were evened out before taking on the established order?
When a business leader, politician or pundit calls for a ‘level playing field’, he or she is exposing either a startling ignorance of real world economics or, more likely, displaying a truly disingenuous attitude toward the facts. My home state of Indiana is at a terrible disadvantage to Hawaii in attracting tourists. Should Hoosiers insist that Uncle Sam provide a level playing field? We could limit the number of people who can go to Hawaii each year or make airlines charge more to fly people there. It sounds stupid, but then so do quotas and tariffs.
If a truly level playing field is set as a prerequisite before competition can begin the result will be an economy that resembles that of France: little innovation, stagnant wage growth and virtually no job creation… all on a very level playing field. This of course will lead to more calls for government intervention in the economy. Before long you’re enacting idiotic ideas like France’s mandatory 35-hour workweek in an attempt to force employers to hire more workers. Of course it doesn’t work, but French citizens—at least those with jobs—don’t mind the shorter workweek at the same pay.
The decline of the U.S. auto industry has been painful to watch, especially in my hometown of Pendleton, which was particularly dependent on General Motors. But if the success of Mr. Wagoner’s recovery plan is dependent upon being granted a level playing field, GM’s stock has a great deal further to fall.
I also criticized Wagoner’s “level playing field” argument in the third item at this post.
The playing field never will be totally level. Even though you’re on the disadvantaged end at the moment, Mr. Wagoner, that doesn’t mean your company can’t return to dominance. It will require massive rethinks, by you, your company, and The UAW, but you can do it.
Now let’s play ball.
