The Auto Bailout Saved Old Wasters, Aborted New Improvers
|June 6, 2014||Posted by Staff under Editorials|
This 2014 excerpt of News Alert, May 11, is by David Stockman.
The auto bailouts did not save or create a single new auto job. They just shifted 25,000-50,000 assembly plant and supplier jobs from south of the Mason-Dixon Line to the rust belt in Ohio, Michigan, Wisconsin, and Illinois. That is, the North American and global auto industries were drowning in excess capacity on the eve of the crisis, and the only question was whether consumer demand for new cars would be satisfied by the efficient foreign transplant suppliers located in Alabama or high-cost, long-in-the-tooth UAW dominated plants in the north.
Thus, the political decision of the Bush and Obama Administrations to allocate auto jobs based on electoral politics and crony capitalist coddling of the UAW and the Chrysler/GM business complexes did not add a dollar to GDP; it just reshuffled the given level of consumer spending on new cars among regions. And the ultimate result is that the free market was blocked from doing its job of liquidating excess investment and uncompetitive suppliers and plants. In short, true national wealth was reduced by the auto bailouts.
Yet the damage goes beyond dollars and cents. The bailouts have also enabled the rise of a whole generation of soap-salesmen CEOs who tout miracle “recovery” stories, thereby reinforcing the “all fixed” meme. Fiat-Chrysler is a standout case of the latter, and its CEO, Sergio Marchionne, is a bubble illusion merchant of the first rank.
Ed. Notes: Getting bailed out is just one of many subsidies that car makers get. They also get subsidies for “research” and tariffs on imports and exemptions on pollution. If it weren’t for these favors from taxpayers, Detroit probably could not sell one more car — unless they made it non-polluting and fuel-efficient. If they can’t, they should lose market share to those who can. That’s how the market would deliver techno-progress, and how such progress would deliver clean air. And that’s why economic policy should be off limits to politicians of any stripe.