I've been thinking and talking a lot about the issue of the Detroit bailout. The reason is that it is a hard case for me. What's to like about Detroit? For all the reasons everybody talks about, they deserve no sympathy. Prominent among these for me are their bad citizenship and anti-social activities in the environmental and transportation-policy areas, from their documented role in the destruction of perfectly good mass transit systems after WW II to their ceaseless lobbying against federal clean-air standards to their lawsuits against California for that state's progressive environmental efforts and so on.
They have been holding back the future and, it is no exaggeration, threatening the future of mankind. Oh yeah, and they've been terrible businessmen.
Clearly, the idiots who run these companies do not deserve bailing out. But there are two problems with letting them collapse:
- Their workers, and the workers at all the companies that supply them, and all the workers at the restaurants that feed those workers, and so on and so on do not deserve to be hit. But those are the people, not the executives, who will suffer drastic financial harm if we let car companies go out of business (or even one of them).
- The national interest. Do we really want to allow our national capacity for automobile building to slip away?
Death and renewal
Perhaps the solution is to a) let these companies go out of business and b) slap a steep tariff on car imports, and some kind of sanction on cars produced domestically by foreign companies as well. The idea would be to create the space for a blooming of small, fresh, innovative new domestic manufacturers to spring up. This "death and renewal" strategy would seek through public policy to prompt a renewal of the creativity and ferment that we saw early in the history of the auto industry.
The outstanding question I have about such a strategy is whether it is possible for a thousand flowers to bloom in the transportation industry, or whether it is simply too capital intensive to be realistic. Can a startup enter the car business? The Big Three and their suppliers are gigantic organizations incorporating, if not a lot of foresight, wisdom, or good corporate citizenship, at least a lot of experience and expertise in building cars. Would the nation be fine without big companies like the Detroit automakers, or are big industrial transportation companies a vital national resource? Some things, like partical colliders, simply cannot be done by individual geniuses in their garages.
On the other hand, the shattering of the big companies would scatter that expertise but not necessarily destroy it. After all, no one would die; all the Detroit engineers and experts could in theory be assimilated into a new ecosystem of automotive start-ups (a phrase that has been synonymous with "quixotic" for many decades) that might actually make much better use of them.
Plus, it is not even clear whether the car industry itself isn't facing a long-term decline. As the world oil supply starts shrinking -- even the optimists see peak oil as hitting in the teens of this century -- how big a part of our future will individual motorized transportation be? Are we destined to evolve toward a nation of mass transportation, bicycles, and ecologically concentrated urban planning?
Pure capitalism involves a radical degree of constant turmoil and change. Yet our society requires a certain amount of stability -- families, neighborhoods, communities, etc. Capitalism can just bring too much disruption on a human level; in its pure form it would require throwing our borders wide open (you can't have pure capitalism unless labor is free to move about as freely as capital) and having people pick up and move cities or countries at a furious pace as economic conditions dictate. Too much stability, on the other hand, leads to stagnation. Often the best course is to ameliorate the pace of change without standing in its way, and this may be one of those times.
What might that look like? Perhaps, a government rescue of some or all of these companies in combination with taxpayer ownership (which is what infusions of cash bring for everyone else, why not the taxpayers?) Then the taxpayers (ie the government) could shift the focus of these companies (partly through an Obama stimulus package) toward more socially beneficial directions such as the construction of a world class rail system on the scale of the (misguided and disastrous) 1950s interstate highway system project. (Once the taxpayers are forced to prop up the airlines perhaps we can use our new ownership stake in that industry to force them to stop lobbying against that as well.)
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