December 9, 2008

On the American automobile industry

Posted in Finance, Misc at 06:02 by graham

Joshua-Michéle Ross at O’Reilly Radar writes about the money the American taxpayer (government) is giving Genera Motors, Chrysler and Ford to save them from bankruptcy:

This is the privatization of profit and the socialization of loss. The very concept of “Too Big To Fail” points to a deeper truth: the U.S.’s auto industry does not operate within the “free market” at all. Far from it. As their moniker suggests, the “Big Three” are an oligopoly with a long record of eschewing innovation ( electric cars, hybrids etc.), killing off alternatives like mass transit and bullying public policy (lobbying against CAFÉ standards, environmental and tax policies [Hummer owners get a $34K tax credit!], the threat of relocating factories etc.) all in an effort to conform the not so “free market” to its lumbering non-strategies of pursuing short-term profit.

Full article: Catch 22: Too Big To Fail, Too Big To Suceed

The consensus in the comments to that article is that if the government is saving a company that is too big too fail, it should be split up into several smaller companies, so that we only ever have to save it once.

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