Auto Bailouts Will Give Us Detroitsky

He hasn’t even been sworn in yet, and Barack Obama is starting to reveal what his mantra about “change” really means. It means that we will reject the discredited old model of free-market capitalism and embrace the very promising, progressive new model of Soviet-style central planning. That is the upshot of Obama’s proposal for a $50 billion bailout of the Detroit automakers. It is actually a plan for de facto nationalization which will turn the Big Three into permanent wards of the state whose purpose is not to make a profit but to serve the “social goals” set by government. Obama is backing a plan to pump $50 billion into the big American automakers, while also establishing “a czar or board to oversee the companies”—call it Gosplan—which will supervise “a restructuring of the auto industry.” That’s exactly what Detroit needs to recover: the benefit of government central planning. In essence, this is a plan for nationalization of the American auto industry under a new government-appointed board of directors who will supposedly tell the Big Three how to make a profit again. But of course Detroit will never recover under this plan, because its whole purpose is to avoid the one step actually necessary to make the automakers profitable: breaking the hold of the bloated unions. Let’s be clear on that. The purpose of the bailout is not to avoid the destruction of automobile production in the US. Plenty of automobiles are being produced in America by Honda and Toyota and other automakers—at non-unionized shops. And if the Big Three were to go bankrupt, they would likely be bought out, or at least their most valuable pieces would be scooped up by new owners. But if GM goes into bankruptcy, its contracts with the unions would likely be thrown out—you can’t have a contract with a defunct firm—and the new owners would be able to negotiate new contracts from a position of strength. Accept our terms, they would be able to say, or you will all be out of work permanently. That is what a bailout is really meant to avoid: anything that would break the power of the unions. This is not a bailout for GM. It is a bailout for the UAW. [...]

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