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Argument: Bailout of US autos wrongly intervenes in marketplace

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David Brooks. "Bailout to Nowhere". New York Times. 18 Nov. 2008 - 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 United States 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.

[...]But the larger principle is over the nature of America's political system. Is the 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.


Daniel J. Mitchell. "Commentary: Say no to the auto bailout". CNN. 13 Nov. 2008 - A bailout will hurt the overall economy by misallocating resources. When politicians grant special favors to a certain industry or a particular union, such decisions necessarily mean that market forces are being replaced by special-interest deal-making. This type of interference with free markets is why nations such as France, Germany and Japan tend to grow more slowly and enjoy less prosperity.

But if America goes down this same path of government intervention, it is inevitable that we will suffer the same fate of stagnation and higher unemployment.


Geoff McCollom, Co-owner, Dutch Valley Auto Works, a collision-repair shop in Lancaster, Pa.: Generally speaking, I’m in favor of the free market taking its course. So if some have to declare bankruptcy, so be it. Someone will fill that gap, whether a leaner and meaner GM or Ford or their competitors. If there are cars that want to be bought, someone will get that sale. A Toyota or Honda or Nissan would expand their operations if factory space suddenly became available. But it would be painful either way -- restructuring, shrinking, and cutting jobs would hurt. (Inc. Magazine, November 2008) [1]

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