We’ve heard a lot of arguing back and forth about what the government should do about the auto industry collapse. The political left and middle-left want extensive government aid to preserve the auto industry and millions of connected jobs. The right and middle-right argues that aid to these companies will pollute the free-market system and that any return on investment for taxpayers is questionable.
The argument for assistance is that there will be a cascading effect on the economy if any of the domestic automakers go under. They further argue that we need to preserve heavy manufacturing in the U.S. as a matter of national security. These contentions are plausible. The opposition to auto industry aid does not dispute these points.
The opposition contends that any aid to the auto industry will amount to government picking winners and losers in a free market economy; that we will be nationalizing/socializing what should be private industries; and that the auto companies probably will not recover so there will be no repayment of these multi-billion dollar loans back to taxpayers.
There is some truth to these points. Government intervention will have an effect on the marketplace; however, the marketplace has been “polluted” by government intervention for more than a century. Ever since child-labor laws appeared we have evolved into a hybrid free-enterprise-socialist market. With the acceleration of globalization over the last 60-70 years this hybrid economic system has become even more pronounced. The only way to undo this is to create a level playing field both nationally and internationally.
On a national level we need to make our “unionization” laws uniform. We should start with “right to work” vs. “union shop” issue. If every state was either "right to work", or every state was "union shop", we would not be seeing the clearly adversarial relationship between the southern republican senators representing “right to work” states and the senators in “union shop” states where the autos are heavily located. We could then act as one nation with a rational policy toward global economics. If “right to work” is the direction, then government would need to provide certain basic protections for the labor force to assure that management would not act in the manner that led to the creation of unions in the first place.
On an international level the U.S. government must either match the level of government assistance and intervention in the market that other governments provide, or we must negotiate enforceable trade agreements that eliminate or make these interventions internationally uniform. I’m talking about interventions like industry subsidies, currency manipulation, employment benefits, and trade restrictions. For example, much has been made of the compensation disparity between the U.S. companies and the foreign manufacturers. Those countries’ governments provide much of the health care and retirement benefits that cause the differential. Our government must either match this level of intervention or negotiate agreements that eliminate those government interventions globally.
The opposition to a rescue correctly states that taxpayers will not see a return on investment if we provide aid and then continue our trade policies as they are. These and many other companies will not survive, unless government acts to solve these pervasive underlying problems with global and domestic trade.
I completely agree there should be increased tariffs or something to create an equal playing field for the american and japanese car companies. This is the only way the american car companies can survive.
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