Against The Auto Bailout

I think this might be the first thing that Obama does that I will disagree with. It remains to be seen what the deal that he wants looks like -- though, according to the Times, it doesn't look like Congress has the votes -- but even so, I'm very skeptical that saving the auto industry is the right thing to do. My gut reaction is to agree with David Brooks:

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.

While I readily admit that I know next to nothing about the issue, it seems to me that the big U.S. car companies have been slowly dying for decades. This emergency bailout would merely postpone the inevitable. I mean, Honda, Toyota show how you can be a successful, innovative car company. Thomas Friedman wrote yesterday about how the vice-chairman of G.M. said that Prius-like hybrids aren't profitable. But things look differently when demand for oil is increasing and will keep increasing over the long term. I suppose the car companies would have said that high gas prices are a recent, unpredictable phenomena. But my guess is they'd be wrong. It's a no brainer to see that over the decades, as poorer countries industrialize they will demand more energy and oil prices will go up. The Big Three are guilty of short-term tactical business strategies based on things like SUVs and trucks (where the profit margins are higher, I believe) when they should have been preparing for the inevitable.

An argument for the bailout would be the ripple effect of letting a car company go bankrupt in the middle of a recession, and I guess that I'm simply ignorant of the effect of this on the already tough economies of Michigan, Ohio, etc. But it seems to me that the failure of these companies represents something that won't be solved by an emergency bailout. These companies need massive, foundational-level change in order to compete in the 21st century and, as I said, the bailout merely postpones the inevitable.