Monday, December 1, 2008

Does anyone support the bailout?

If they do, I am going to unleash Hazlett on them:

The real problem entailed by the auto-maker subsidies will never be discussed because it can never be seen. The opportunity cost of shovelling capital to companies such as GM is that companies such as Boeing or United Technologies or Disney or start-ups unknown will be unable to use it to fund their projects. Propping up today’s US car manufacturers means beating down tomorrow’s economic star. In an era of technological leaps, those emergent stars tend to be leapers. The bail-out puts the public’s chips on the former, pulling stakes from innovative rivals.

The UK ran this experiment in the 1960s, picking national champions that were to push the national economy to the cusp of global dominance. The government selected companies for protection and subsidy, including British Leyland in autos. BL sank so fast that it had to be acquired by the UK government in 1975 and over £1bn in public funds were pumped into that nationalised money pit by 1980. National champion? The unsubsidised Ford UK overtook BL in the British market. The Thatcher regime sold off BL, liquidating a failed experiment. Competitive car makers – private, unsubsidised and exporting – now dot the English countryside.