Quijote vs. Detroit

I have had a couple of friends call me about the GM bail out issue and ask my opinion, and their response was shock (absolute shock) that I was for government intervention. But not in the way you might think.

Let me be very clear: the government has no place in trying to float a dying economic sector. The auto industry in the United States, much like the manufacturing industry in general, has been dying for decades now. Robotics have replaced many assembly line jobs, and the foreign competition is killing our workers (while benefiting our consumers). So where does government play a role in this? Not in loaning obscene amounts of money to dying industries.

Let's assume that GM has not mismanaged its business by not foreseeing the change in demand from large gas guzzlers to smaller more fuel efficient cars. Let's assume that they made optimal decisions that have brought them to their current crisis. Even then they would be shrinking. Why should we the taxpayers keep this industry on life support when its very existence freezes up effective labor in an inefficient industry and cheats consumers out of good products (why else do we pay so little for more sturdy foreign cars?)?
Even then, if GM, Chrysler, and Ford had made good decisions our government should not loan them money (not bail out, but not even loan). In fact we should skip the firms altogether. We should skip the corrupt unions as well. Go straight to the worker. Offer every laid off employee two years of subsidized education (through loans or scholarships or what have you) to retrain in another field: health sciences, technology, whatever. Make our auto workers competitive in other sectors of the economy so they don't have to worry about keeping their jobs at a plant that very well might lay them off.
Or better yet, let's subsidize their movements across the country. If an engineer or auto worker can't find a job in Detroit, lets give them a tax break for moving to a city where they can. Let's put that money INTO the economy, INTO the worker, instead of into the firm or into the union. Unions do not make wages go up. The competitive nature of workers make wages go up. Unions do not protect the interest of workers. Demand for workers by firms leads to companies offering benefits to workers. Unions have done NOTHING, while the change in the economic make-up of our country has done EVERYTHING for workers. Basically: if you want a competitive wage then work hard, get an education, and bargain hard for it. Don't rely on your union representative to have YOUR best interests in mind when he's happy just getting your dues.

Here is the metaphor that I will get in trouble for.
Imagine a comatose patient, who has no hope of waking up. The brain is for all intents and purposes dead, and the body is kept alive by machines. The organs are perfectly healthy. We love the patient. We have great memories with the patient. But if we keep them alive, the organs will continue to keep a vegetable alive while at LEAST five other people who could use the transplant die (heart, lungs, kidneys, pancreas, what have you). This is the hard part. This is where we have to decide to pull the plug, and let what living parts of the body go to save lives. The body is NOT the soul. The body is NOT the essence. The lessons we've learned, the culture we've accumulated from the US auto worker will live on in our hearts and minds. But it is as dead as the US farmer. This is opportunity cost, which I struggle to teach my class every semester. The cost of something is not what you pay to get it. The cost of something is WHAT YOU SACRIFICE to get it. What you could be doing instead with your resources. We are sacrificing the talent and hard work of Detroit engineers and autoworkers to keep a dead industry on life support. Let it go. Let them go to other sectors of the economy where they are needed. It is going to hurt: the unemployment rate will go up, sales will go down, and people will suffer. But in the long run this is what we have to do.

Let me also be clear on this: What is good for GM, is NOT good for the US. Any company that tells you that "what is good for [insert name here] is good for the US" is lying to you, whether they are a bank, department store, oil company, factory, or car maker.

While I believe this bail out will go through, I do not believe it will help the US auto worker. It will keep GM executives on life support while they retool (see massive layoffs and restructuring) to keep their asses out of the fire, and it will keep union leaders in their positions. Meanwhile the workers will be left out in the cold. If we must have government intervention, then we must have it at the level of re-education and retraining to allow workers to become more competitive. Not to benefit unions and firms.

Check the BLS (bureau of labor statistics) reports in the next three years. The US manufacturing industry will continue to lose jobs in spite of recession or boom years.