Faulty Assumptions for the Detroit Bailout

The American Conservative magazine is one of my favorites. It is one of only three political magazines I have a subscription to - the others being Reason and Liberty.

But this article, by Patrick Choate, is infuriating. Choate argues for bailing out the Detroit Three, which he mistakenly refers to as the “American auto industry” (after all three of the “10 Most American Cars” are Toyotas).

Part of the problem is Choate’s assumption, laid out in the subhead: “If Wall Street warrants a bailout, why not Detroit?”  Let’s be clear Wall Street got a bailout, that doesn’t mean Wall Street warranted it.

Of all places TAC should know that just because the government did something, doesn’t mean it’s warranted, wise or even Constitutional. It’s sort of like saying “If Iraq warranted invasion, why not Pakistan?” After all, that’s where Bin Laden is right?

Later, he buys into the Big Three/UAW union’s propaganda. “a 100 percent closedown of the Big Three auto producers would result in the loss of almost 3 million U.S. jobs in the first year” he tells us. Nonsense. That’s only the case if the demand for cars drops simultaneously and all the assets of the so-called “Big Three” go dormant.

Without a bailout, if/when one, two or all of the Big Three go bankrupt, those valuable assets aren’t going to go to waste. They’ll be bought up at a discount and repurposed, most likely to make profitable cars. Many of the skilled employees that worked in the plants before will be needed to return to work in the plants. The same can be said of most of the suppliers, salesman and others who helped the Detroit Three produce, distribute, design and sell cars. Of course, the same can’t be said for the union officials who would be out of business, but who cares about those thugs?

Markets are incredibly vibrant and dynamic things. Resources don’t go to waste except when the government prevents the creative destruction that drives innovation. Choate may be right that the thinking that brought about the Wall Street bailout could be used to justify the a Detroit bailout, but that would just be repeating past mistakes. 

Haven’t we already thrown enough good money after bad?

One Response to “Faulty Assumptions for the Detroit Bailout”

  1. unparalled61 Says:

    Any financial help is necessary for them. Indeed these three automakers need any financial assistance and support all the way to make greener cars for the future.

Leave a Reply