Friday, November 14, 2008

Political Friday: Bailouts and car companies

Because I get pedantic when it comes to politics I'm going to avoid politics except on Fridays. With the upcoming administration change, not to mention the bailout  (today's topic) I have no doubt there will be a lot to rant about. Hopefully, keeping politics confined to one day a week will keep me brief.

Anyone who has been watching the news lately knows that we, the American public, just got sucked into a gigantic "investment" in various failing companies. If my language doesn't make it obvious, I think this is a bad idea. It is not well thought-out, with Treasury Dept officials admitting that the $700 billion number was pulled from thin air ("It's not based on any particular data point," a Treasury spokeswoman told Tuesday. "We just wanted to choose a really large number.") Now, the American auto industry is crawling into DC to ask for money, and it looks like they're going to get it. The "Big Three" are failing because they chose to invest in a dead end - SUVs - and not fuel-saving technologies like hybrids. They are now regretting that and for some reason think that the people who have chosen to not buy their cars (the tax payers) should pay for their retooling. 

Rewarding the Big Three for their poor choice of direction (bigger = better) isn't good for anyone. Not to be too unsympathetic, but companies sometimes fail in a capitalist economy, that's part of the risk. The advantage is that when companies fail their competitors (in this case, the companies that invested in smaller, fuel-efficient and/or hybrid cars) will be able to expand into a larger section of the market, hiring many of the workers and potentially buying up the manufacturing facilities. Then we, the consumers, can buy the best products. OK, enough econ for one day.

Ghost Rider hit on this same topic over at Bike Commuters.

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