Posted on 12/04/2008 4:08:37 PM PST by CE2949BB
Washington, D.C.--Advocates of a bailout for the Big Three claim that if we allow these giants to fail, it will destroy the U.S. auto industry. “In fact,” said Alex Epstein, an analyst at the Ayn Rand Institute, “it is the bailout, a veritable marriage between Detroit and Washington, that will destroy the U.S. auto industry.
“The Big Three have no right to demand that taxpayers risk money on them when private investors won’t. They do, however, have a right to demand the repeal of the policies that have helped destroy the auto industry. These include the labor laws that have forced them to acquiesce to economically catastrophic UAW demands, and fuel economy laws that have forced them to produce small cars that they can’t profit from given their labor costs. Indeed, the Big Three should have done this long ago--so that they would have been free to produce desirable cars at a profit in America, just as they do in scores of countries around the world.
“But instead of demanding their freedom and making a case to the market, the automakers are surrendering even more of their freedom to the government in exchange for taxpayer money. They have met Congress’s demand to commit to producing more small cars--even though it is small cars that have bankrupted the companies in the first place.
“By seeking handouts, not freedom, the auto industry is helping to destroy any remnant of a genuine auto market. In a real market, free companies would make money by producing the cars that free individuals judge best. In the new pseudo market, companies will make money by collecting taxpayer dollars in exchange for making whatever cars Washington tells them to. If this is what it means to save the U.S. auto industry, then the industry should die, and then real, freedom-seeking, profit-making companies might emerge.”
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Alex Epstein is an analyst at the Ayn Rand Center for Individual Rights, focusing on business issues. The Institute promotes Objectivism, the philosophy of Ayn Rand--author of Atlas Shrugged and The Fountainhead.
For more articles by Alex Epstein, and his bio, click here.
EGGZACLY!
The nationalization of the free enterprise system will destroy the country. History has proven socialism doesn’t work.
The Big Three lost their reputation for building quality cars decades ago and were never able to regain it because their business model relied on their customers being suckers rather than a true devotion to building a quality product. Their labor issues are not the only reason this situation was allowed to continue.
I just finished reading “Atlas Shrugged.” I was continuously amazed while reading it because it could have been written yesterday describing the creeping socialization of America and why that’s bad. I wish I had read this book twenty years ago.
If you really want to know why America has been successful for 200+ years and why we are currently headed in the wrong direction, read this book.
I wonder what the “breakup value” of GM is? The book value of GM assets has to far exceed the corporation current market value by a wide margin, right? Then why hasn’t some corporate raider targeted these GM before now? There has to be a reason for it.
I concur
The Big Three (or the “Beg Three”) are what they are, pension and health-care delivery entities, that for a brief span of a few decades, also happened to build automobiles to in some part offset the costs of administrating these pension and health-care benefits for a relatively small part of the employees in the US.
What they are doing now is asking for a transfer of cash directly from the US Treasury to fund the continued cost of administering these same pension and health-care benefits, as there is insufficient revenue from the manufacture of automobiles to continue to fund the present arrangement.
Of course, the recipients of these benefits COULD volunteer to accept a less generous bundle of benefits, and thus all by themselves, allow the domestic automobile manufacturing corporations to retool and restructure to be competitive with foreign based manufacturers.
Or the US Senate, placing the burden on the US Treasury, could simply deal directly with the UAW, disbursing the cash directly to the union for distribution for pension funds and retiree health benefits, while allowing union members to purchase their own health benefits through the network of Federal employee health benefits providers.
GM, Ford and Chrysler get out of the benefits administration business altogether, and get back to what they know best, building cars. This they do in overseas locations, where they build vehicles with much better economy and safety records, at far lower costs per hour for labor and greater productivity, than is expected here in the US.
Well, Reagan did impose huge tariffs (11X increase) in imported motorcycles back in 1983 and that helped save Harley Davidson. Maybe a tariff on imported cars would guarantee the "loan" is paid back by the Big 3 by allowing them to thrive and also encourage the foreign automakers to invest more resources in the USA. As Reagan declared in his Executive memorandum, the tariff action was "consistent with our national economic interests."
what makes them think the American people want to buy a chunk of the auto industry? we dont even want to buy their cars.
Try negative book value. The Big Three have many assets, but have many more liabilities. Huge health and pension liabilities.
OK. I asked for a reason & you gave one. But haven't there been instances involving takeovers where such health & retirement liabilities have been restructured by the purchaser? Might not be a fair question to ask you. Thanks for pointing out where my reasoning is flawed.
Perhaps!! But it could also allow them to perpetuate their inefficient ways, doing OK until another "burp" in the economy sends them running back to "Big Brother".
Obama probably couldn’t get away with punative import tariffs like those that saved Harley-Davidson under Reagan. It would violate numerous trade agreements that have been enacted over the last 20 years & invite retaliation against American companies that export (like Boeing).
read in AM
If you think just about pensions, you can see where companies have mostly moved out of that business in favor of 401(k)'s where they still have a huge involvement, but not the same type of obligation as they had with pensions. Plus, of course, the onus is now on employees to be involved with their retirement as opposed to having to do nothing when there was a pension waiting for them. Aside from the recent stock market plunge, this has been a good thing for workers. And, by the way, that recent stock market plunge hurting all those 401(k)'s should make people want less government intervention in the economy rather than want the feds to pile in for even more damage than they've already done.
So you would think the same could hold for healthcare by moving it away from companies in a similar manner and having people be directly involved. Seems like it would help everyone if we were to have a revitalized private health insurance industry, but that cannot happen so long as huge companies like the automakers are still in the benefits business. Well, as you said, getting the automakers out of the benefits administration business and back to the automobile business should be the goal, and we can add to that the goal of more private health insurance.
Or maybe the Big 3 could actually make a product consumers want to buy.
(Naaah! Let’s just tax the heck out of our competition!)
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