The Automobile Industry: Driving Our Economy Into the Ground

These are scary times. The economic climate is a harsh one. Even the big-wigs at the Federal Reserve don't know what the problem with our economy is, let alone know how to fix it. The Fed is scrambling to assist, developing new facilities almost every other week it seems. And as Americans watch their efforts fail, we cannot help help but panic. We are so terrified, we are willing to go to any measures to fix the problem, regardless of what the consequences may be.
I am speaking, of course, of the current "bailouts", specifically the one involving the auto industry. The $700 billion dollar bailout of our financial system is hard to stomach, but I find myself wanting to stick a finger down my throat in order to be rid of the auto-industry bailout altogether. Before I even begin to explain why this bailout is a miserable idea, I want to point out some key differences between a bank and the auto industry. First of all, a bank creates money. One person deposits ten dollars, and the bank loans that money to someone else and, voila: now two people have ten dollars. Ten dollars just became twenty. Now take this concept and apply it to the entire U.S. economy. What do we suppose would happen if the institutions that facilitated these transactions ceased to exist? Well, a lot of people would be wondering where the hell their ten dollars went.
If these firms were allowed to fail, money would literally disappear from the economy.
For this reason, I am willing to "bite the bullet", so to speak, and bail out these financial firms, regardless of the fact that they were the culprits behind this mess. By punishing these firms, we would be punishing the rest of America - even those who had no stake in these firms. Not helping is simply not an option.
Here is where the auto industry comes in. These industries do not carry out the same functions as a lending institution, so their fate is not a determinant of the money supply. It is true, stakeholders in these firms would suffer huge losses: shareholders would lose the value of their stock and thousands would lose their jobs. It only seems natural for the government to step in and prevent these negative consequences, right?
Absolutely not, for the same reason that our non-socialist government doesn't bail out any firm that might go under. For one, we already have a fairly large deficit, and these programs are extremely expensive. More importantly, what kind of message would the government be sending if it bailed out these firms? The government is essentially releasing a statement saying, "It doesn't really matter how dumb the decisions you make are. If you are big enough, we will save you."
Recklessness and a lack of corporate responsibility is exactly what got us into this mess, and is exactly what we do NOT need right now. With the advent of an auto-industry bailout, we can expect to see a wave of mergers in all industries as firms scramble to receive government assistance. Unfortunately, these mergers will take place even when they are not in the best interest for stakeholders. This is problematic because the government cannot afford to bail out everyone, leaving us with a lot of large, but deeply troubled firms. In the long run, this type of behavior will be far more costly to the economy than pulling the plug on a single firm.
The American automobile firms are failing because they offer an inferior product. Clearly, the fact that Dodge can no longer move their V8 monster trucks off the lot is not solely due to our financial crisis. As a result of recent high gas prices and growing environmental concerns (among other reasons), consumers are no longer demanding these vehicles. Through allocation of dollars, consumers are telling the market that they no longer want the kind of vehicles that American auto makers are producing. The auto industries are not failing just because of the recession, they are failing because they are not listening to the market. Why should the government invest tax-payer dollars in keeping products around that nobody wants? The simple concept of supply and demand tells us: they shouldn't. It has never been the government's job to pick winners or losers - that would be socialist, and history has already shown us how well socialism works (i.e. Soviet Union). Either I am living in a nightmare where the rational people of the United States have all gone loopy, or we are going down a very scary, very real path.
Please, don't anyone pinch me..