1 post tagged “industry”
Everyone knows why there's this $700 billion elephant tiptoeing around our economy, but nobody seems to know what to do with it. Lately folks are getting alarmed that the Big Three automakers - GM, Ford, Chrysler - are just a few months away from bankruptcy and begging for their hunk of elephant hide.
What really irks me are the calls for "economic darwinism" i.e. letting the car companies go bankrupt because they failed to adapt to a changing market.
While I'm quick to agree that the Big Three have been slogging around their in own graveyard for years, at least they didn't dig their own graves and dare others to push them into it. Who would be so crazy as to dance on the edge of burial? How about the "Failing Five": Bear Sterns, Merrill Lynch, Lehman Brothers, AIG, Washington Mutual...
Why would we be so quick to bail out financial companies on Wall Street but allow Motor City to collapse? Consider this: General Motors employs as many people as all five of the above financial companies combined. Add Ford and Chrysler to the mix and it's nearly double. An auto industry expert on NPR last week estimated that including suppliers, the bankruptcy of the Big Three could cost an even bigger "three": 3 million jobs.
I've been critical of the Big Three since the early 1990s when it was clear to me that they were playing follow the leader with Honda and Toyota, banking on marketing campaigns and "buy American" sentiment to maintain an appearance of competitiveness.
However, the auto companies deserve some credit for remaining solvent in an economy that hits their products harder than just about anyone's, a financial crisis that happened after fuel prices hit record highs. Despite those two huge hammers to the grills of the Big Three, they're telling us that they won't go bankrupt for a few more months if things don't improve.
Meanwhile those Failing Five financial companies couldn't even survive a few days when things began to turn sour. They were recklessly living on the edge of their self-dug graves, boasting of their talent until they fell in, screaming for help all the way. In a flash Congress was there to bail them out.
The automakers could've pushed themselves closer to the limit with last-ditch marketing campaigns or sales incentives, but they didn't. While the Big Three blamed labor unions for some of their problems, they also fought those unions whenever possible, knowing that long-term survival was at stake.
Meanwhile, the Failing Five blamed over-zealous home buyers and builders yet continued to cater to their mortgage-hungry wallets.
If we see fit to bail out Wall Street, then it has to also be correct to bail out Motor City as well. If our economy can't withstand the complete atrophy of our credit system, neither can it survive the complete atophy of our manufacturing knowledge base.
While I believe that manufacturing is "old tech" as a core business model, there's still room for "high tech" applications on the process and research side that could be exported to countries that still rely on manufacturing. If the Big Three go belly up, that's 3 million workers with nowhere else to go - it could create a permanent increase in unemployment rate. We need those people to remain employed so that they may adapt and evolve as their companies also need to do.
If we don't bail out the auto industry, we might as well keep that $700 billion in the Treasury and simply let economic depression run its course. Let's not reward the financial industry for being the least responsible component of our national economy by limiting our bailout money exclusively to them.
Of course if we send that elephant marching to Detroit, then I'm sure Boeing will be next in line begging to do the elephant walk... Anyone else want to join in?
