The Reading Blog

There are some good arguments against the proposed government bailout of the U.S. automobile industry. Maybe there are better uses for 50 billion dollars that would more directly help U.S. workers. Checkout these excerpts from recent articles.

In The New York Times (November 14, 2008) Op-Ed column “Bailout to Nowhere” David Brook writes,

Not so long ago, corporate giants with names like PanAm, ITT and Montgomery Ward roamed the earth. They faded and were replaced by new companies with names like Microsoft, Southwest Airlines and Target. The U.S. became famous for this pattern of decay and new growth. Over time, American government built a bigger safety net so workers could survive the vicissitudes of this creative destruction — with unemployment insurance and soon, one hopes, health care security. But the government has generally not interfered in the dynamic process itself, which is the source of the country’s prosperity.

But this, apparently, is about to change. Democrats from Barack Obama to Nancy Pelosi want to grant immortality to General Motors, Chrysler and Ford. They have decided to follow an earlier $25 billion loan with a $50 billion bailout, which would inevitably be followed by more billions later, because if these companies are not permitted to go bankrupt now, they never will be.

This is a different sort of endeavor than the $750 billion bailout of Wall Street. That money was used to save the financial system itself. It was used to save the capital markets on which the process of creative destruction depends.

Granting immortality to Detroit’s Big Three does not enhance creative destruction. It retards it. It crosses a line, a bright line. It is not about saving a system; there will still be cars made and sold in America. It is about saving politically powerful corporations. A Detroit bailout would set a precedent for every single politically connected corporation in America. There already is a long line of lobbyists bidding for federal money. If Detroit gets money, then everyone would have a case. After all, are the employees of Circuit City or the newspaper industry inferior to the employees of Chrysler?

It is all a reminder that the biggest threat to a healthy economy is not the socialists of campaign lore. It’s C.E.O.’s. It’s politically powerful crony capitalists who use their influence to create a stagnant corporate welfare state.[...]

[...] In short, a bailout will not solve anything — just postpone things. If this goes through, Big Three executives will make decisions knowing that whatever happens, Uncle Sam will bail them out — just like Fannie Mae and Freddie Mac. In the meantime, capital that could have gone to successful companies and programs will be directed toward companies with a history of using it badly. [...]

[...] But the larger principle is over the nature of America’s political system. Is this country going to slide into progressive corporatism, a merger of corporate and federal power that will inevitably stifle competition, empower corporate and federal bureaucrats and protect entrenched interests? Or is the U.S. going to stick with its historic model: Helping workers weather the storms of a dynamic economy, but preserving the dynamism that is the core of the country’s success. [...]

In the San Francisco Chronicle (November 14, 2008) article “Detroit Must Die. American Cars Are Uniformly God-Awful. Why Save Them?” Mark Morford writes,

[...] The truth is, American cars haven’t been interesting or exceptional in decades. When it comes to small and efficient, there isn’t a single truly desirable American car on the road today. And innovation? Dear God. The last new idea a U.S. manufacturer had was sticking a mini fridge under the seat of the Caravan. Neato.

And now here’s the other thing I think when I hear that the bloated American auto industry is on the verge of complete collapse, failure, bankruptcy, that the Big Three — Ford, GM, Chrysler — are losing billions hand over tailpipe, and that Obama and Nancy Pelosi are right now considering shoveling many billions into their voracious maws to try and keep them afloat for a while longer, just so they can keep producing crap no one really wants.

I think: Are you kidding me? We have a chance to let this fat, lazy, top-heavy, SUV-glutted industry implode like it so very much deserves, and we might not take it? I think: What an opportunity. We could begin to reinvent the American automobile starting next week, and we might instead keep the old ways alive simply because the Big Three were too stupid and greedy to see past their gross SUV sales figures for the past 25 years? Come on.

[....] But the truth is, this economic crisis might be our best chance yet to wipe the flabby, useless U.S. transportation slate clean and begin anew, armed with a whole new set of tools American auto manufacturing has never used before: efficiency, ingenuity, agility. Can you imagine?

I realize I am no economist. I fully understand there might be reasons far larger and more fiscally complicated to justify keeping the Big Three alive for awhile longer, simply because, like AIG, so many billions are wrapped up in their operations and in the various supply chains that support them, to let them all fail nearly simultaneously could rip a hole in our sinking ship of state far larger and more dangerous than the one that results from letting them suffer and die slowly, bleeding billions all the way.

What’s more, I’m also not so heartless to ignore the brutal job losses, the tens of thousands of collapsed pension plans and failed retirement accounts that would result from the end of American auto industry. It would be horrible indeed. But maybe that’s where the government’s billions would be far more useful, to ease the meltdown and provide retraining.

Here’s the upshot: The American auto market is the biggest in the world. Our near-religious adoration of cars isn’t vanishing anytime soon. There are hundreds of billions of dollars still to be made. Let prehistoric Big Auto die now, put the old, tired, sickly circus elephant out of its misery, and watch what happens.

Innovation would skyrocket. Entrepreneurs would flood in. New and pioneering car companies — or better yet, radical new ideas for urban human transport — would flourish. New jobs would be created almost instantly. Those supply chains wouldn’t vanish, they’d adapt. The American auto industry would convulse, struggle, acclimate, reinvent itself anew.[...]