The prodigal son: domestic automakers?

Check out this article by Steve Chapman at townhall.com :

http://townhall.com/columnists/SteveChapman/2009/02/22/detroit_as_the_prodigal_son

This article is the easiest to read and understand in economic terms, the case for why the big three should be allowed to fail. I supported the bridge loans pragmatically,  not based on my principles.

On the one hand, the author is completely right about the demise of the big three. I am getting tired of hearing the phrase “too big to fail.” In economics, failure is recognized as a deterrence and something that should be planned for and thought about. If there were no foreign competition, we would still be driving around K-cars and Chevy Cavaliers. The imports have forced the big three to a level of design and quality that is out of this world. Without competition, there was NO reason to change the status quo. Management was complacent for far too long from making the tough choices needed during the nineties. The labor unions are equally culpable in this mess because they chose greed during the present over sustainability and partnership with the company. After all, if the company goes belly up, the best contract in the world is worthless.

Instead of a BUT… I prefer the term HOWEVER… This country needs domestic manufacturing capability. Simply for matters of national security, we need to be able to manufacture and be somewhat self sufficient if needed. The correction of the market in this case would be absolutely devastating. Communities and livelihoods would be battered.

My dilemma is as follows:

As an American citizen, I want my country to be able to manufacture weapons and vehicles in case we have another world war such as we did during WWII.

As a Michigander, the loss of the big three or any variation of, would further push my colleagues, friends, and neighborhoods to despair. This would undoubtedly lead to greater suffering, crime, and just general malaise in my local society.

As a conservative, I believe in the markets. The invisible hand does work, is working, and should be allowed to work! Let those businesses that waste resources and capital inefficiently go away so better and leaner businesses can thrive. Get government out of the picture, let those rise and fall on the choices that they made, and allow citizens to determine their own best choices and actions not some fat cat bureaucrat in office. Not to mention, if we try protectionism, the foreign capital that has been propping us up for the last few years will dry up, exports will be frozen and what we do make will sit on the docks, inflation will be rampant, and that will put us in a depression for sure.

The success of the automakers depends solely on the marketplace. That is a fact that few people are discussing. If consumers CHOOSE not to buy that product, then no amount of bailing out by anyone will do any good. How can people think that they can legislate private and personal choices? Living in communist Russia or Venezuela, maybe but in America? Unlikely.

The analogy of the prodigal son does not quite work in this case. The son who stayed behind while the other partied was not cheated, because he was in his fathers grace and light the whole time the partier suffered in the darkness. I would not necessarily say “poor Honda and Toyota, you have suffered while your American counterparts yukked it up.” The only way the big three become the prodigal son is if the “buy American” marketing catches on and the consumer forgives. Will they? Should they?

What would you choose and why? Which principles guide your decisions?

Advertisement