Chapter 3: The End of the World.

The article

http://www.freep.com/article/20081122/BUSINESS01/81122047/1014


Summary

General Motors has reviewed the possibility of bankruptcy. GM basically said to themselves - No! We cannot be bankrupt, it is not an option! Their plan is to receive a share of $25-billion low-cost loan from the government to survive the economic downturn. They argued that consumers are unlikely to purchase vehicles from an automaker in bankruptcy. The congressional leaders said, "if the plans are convincing, they would hold more hearings on a domestic auto loan bailout program."

Connections

General Motors is a privately owned company. It is not owned by the government in any way and now they are requesting money from the government. The 3rd party effects in this case are society as a whole. If GM goes bankrupt, many, many people will be laid off. This is related to Economic stabilization because if GM gets more money, they may get people spending again, which "hopefully" leads to a stabilized economy. On the other hand, if they don't help GM and GM declares bankruptcy, we may fall from a recession to a depression. This is indirectly related to the government because the government absolutely does not want people to be laid off. So adjustments or loans can fix things. This benefits population as a whole, but it will charge people revenue (more tax) for the adjustment. The government wants to get involved in this market (automobiles) because of the economic downturn and in this case, it fits into the "Possible shortcomings of the Free-market System." category.


Reflection

General Motors is not the only company that will fall if the government doesn't step in. Ford and Chrysler is also in the same position. These privately owned companies have possible shortcomings and if these companies survive, it is a positive 3rd party demand since people will have jobs, higher incomes, and a better economy. The government even considering to help privately owned companies is a good thing for the economy. I guess the government will have to adjust their spending's and tax policies to help the economic condition.