Market Failure

Perhaps some sort of industry oversight committee? Or maybe a non-profit organization of some kind?

Funny—I said something similar on another blog and was called a thug—presumably because the market is supposed to take care of itself. Teach me to stray from Omninerd!

I am undecided on this bailout, but I disagree with the idea that this is a failure of the free market. If this were a truly free market, at least one of the Big Three would have gone under years ago. Chrysler, for one, owes its very existence to government intervention.

Two things that have brought us here:

1. The excessive demands of the auto unions, who along with government employees are the only people left in America with defined-benefit plans. Toyota and Honda have nearly all their US plants in "Right to Work" (non-union) states like Tennessee and thus don’t have the burdens of union demands. Ford, for example, has $1500 built into the price of each car it sells for "legacy costs."

I’m not saying it’s not unfair. A company promised you a retirement, then the world changed and they reneged on that promise. But the alternative is bankruptcy, so you’re left with two bad choices.

My dad works for a Japanese tractor company. About ten years ago, they sent him 20 years’ worth of his retirement contributions and told him "no more defined-benefit retirement." That sucks, but my dad has taken on responsibility for his own retirement. If he can do it, so can an auto worker.

2. The other source of the industry’s woes is free trade- specifically, the failure of the government to impose a tariff, or some form of protectionism. If it is truly in our nation’s best interest to have these companies, as those supporting this bailout argue, we could have imposed a tariff on all imported cars years ago. Protectionism is a bad word, but the fact is other countries are more protectionist than us, and that is one reason their domestic auto industries do well. When a former boss moved to Japan for a year, I was shocked to learn that Japan does not allow non-Japanese manufactured cars into their country. This is Japan, the country that sells the most cars in the US.

"Free trade" and "unions" are the culprits here, not the "free market." If you mean free trade, Occams, then I wholeheartedly agree with you, but I suspect you’re just trying to make this some indictment of capitalism. If America was a truly capitalist country, though, we wouldn’t have as many airlines, car manufacturers, telephone companies, or other businesses here that have depended on government largesse and over-regulation to keep them in business.