There seems to be a growing wave of indignation against those (like me) who supported a financial system bailout, but oppose a bailout of the Detroit auto industry.
Perhaps it’s because our image of financiers runs to Gordon Gekko, while auto workers are embodied by a fun-loving Michael Keaton in “Gung Ho“.
(just remember, he’s also responsible for “Multiplicity”. And Bale was way better as Batman.)
It’s also the case that many look upon manufacturing an actual product as a more worthy pursuit than simply moving money around (and taking your cut in the process).
But when you step back and look at the overall situation, it’s hard to make a rational argument for favoring the automakers.
1) Detroit automakers are the weak sisters of their industry; American financial institutions are world leaders.
Let’s face it, GM and Ford have been totally outclassed by the likes of Toyota, Honda, BMW, and even, gulp, Renault/Nissan. In contrast, despite the presence of major overseas players like HSBC, outfits like Goldman are still leading the pack in innovation and profitability.
If I have to bail someone out, I’d rather not back a proven loser.
2) If the automakers fail, the consequences will be dire. If the banks fail, we’re all fucked.
Yes, people like to cite the number of people employed by the Big 3. But guess what–even if they all go under, America will still need cars, and almost all of them will still be built in America. They’ll just be built on Toyota and Honda plants.
There may be fewer jobs, but that’s just because the Big 3 are bloated and inefficient. I’d rather save the money on bailouts and provide better unemployment benefits.
If the banks fail, we’ll be stuck bartering foil-wrapped packets of oily, foul-tasting fish.
3) Trying to save unnecessary manufacturing jobs is like trying to turn back the clock…in real life, it doesn’t work, even if you have a Delorean.
20 years ago, the UAW had 1.2 million members. Today, it has less than 600,000. I’ll be happy to bet anyone $1,000 that in 20 years, it will have less than 300,000 members.
Government intervention can’t ignore basic trends. It wouldn’t have mattered if Teddy Roosevelt had launched a major program to save the buggy whip industry or preserve the family farm, both those industries were doomed.
In the end, I think Megan McArdle of the Atlantic put it best. She recently wrote a very personal post about her own struggles after graduating from business school; the consulting firm she intended to join rescinded its offer after 9-11, and she had to move back in with her parents while searching for a job:
“But whatever your feeling about government intervention in the economy, or the correct level of income inequality, I think there’s one thing we can all agree on: for the world to get better, things that don’t work have to fail. We cannot keep alive every company, every car and every job that someone once liked, because that way lies stagnation and death. Places where production decisions are made based on how much labor they can consume, rather than how much value they can produce, make everyone in society worse off in the long run.
I understand that this is not what the auto workers want; they want their jobs. But while I am happy to help the auto workers, I am not happy to help them manufacture undesireable cars at massive social cost. I too, would have liked to keep my job as a management consultant. But I didn’t have a right to have the job I wanted merely because I liked it. And it wouldn’t have been good for America if I had.”