Quote:
Originally Posted by Claeren
The conservative in me 100% agrees because (as you well know) that capital should be allocated to winning American business and winning American producers that can step in and fill that output void with their high value American products.
The problem is that there is not anyone to step in! It is all foreign manufacturers with better technology, better management, better innovation and (therefore) better product.
You let them collapse and there is nothing domestic to take their place. So the logic starts to fray? To not save them is to essentially forfeit a massive part of your industrial base to other nation states. A nation like America simply cannot be in that position. (< which goes beyond economics and markets, it starts to compromise your ability to provide industrial output in major wartimes for example.)
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I would almost like to see those companies fail but then provide government seed capital to 2 or 3 start-ups with really progressive management teams to buy the Big-3's technology (out of bankruptsy). At least then you are working to rebuild that capacity and innovation inside of America but on a clean slate? New management, new (non union?) workers, no debt, new factories, etc.
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So in short, it is not even losing the money that bothers me (though it does), it is the fact that even if you don't spend the money there is not really any American company benefitting from it like theoretically (in a closed system) they would.
Thus: You are screwed if you do the bailout and you are screwed if you don't do the bailout so.... you don't do the bailout I guess? Yet it is so far from being a triumph of capitalism... ?
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Good post Claeren. First off, I'm with you that its not so much about money (screw capitalism, I remember having this debate with peter12 where he was saying capitalism is the only system that works
and its the best system we've ever had... lol) its about whether this bailout will work.
So as we sit right now, we have the Big 3 with outdated production technology, management stuck in 1970's mode and seemingly only understanding 1970's, and still posting negative operating margins (and negative profitability margins in general)... and we want them to do some corporate restructuring and enter a market they don't understand? I don't like the odds of that at all. So, without a doubt in my mind, the answer is: let the Big 3 fend for themselves. If they go bankrupt, so be it, it was a failing business model, entering a market and trying something new with old-school management... and they are starting, trailing their competitors... and they will likely need new technology (i.e. capital expendetures) to do so. They are going to need another multi-billion $ bailout in a few years ago, and this bailout (and 2003) is just to slow down the death process as the Big 3 slowly whimper away. This isn't a bailout, its an allowence (i.e. allowence we got as a kid).
Unfortunately - and I argued with peter12 on this as well, with him saying something to the effect that no country in the world is even close to threatening the USA cause capitalism rulez- the USA's brain drain and the jobs leaving the USA to emerging markets is the biggest problem the USA faces. Now I understand that in business today, business doesn't operate in isolation within a country. This is the problem that needs to be fixed. Rather then invest the money and efforts into bailing out dying companies, I would like to see a serious push towards re-developing the education base in the USA. (How, I do not know.) The USA has to start creating value, rather then just being driven off consumer spending, spend spend spend. To some point, the USA has to do something to keep jobs in the USA, some way some how. At this rate, the USA is in peril no matter if the car industry dies or not.
However... as I said earlier, the USA has the deepest reserves in the world. Car industry aside, the technology and infrustructure, as well as the social infustructure, is currently the USA's competitive advantage (albeit they are losing that quickly) and to me, the USA has to use that to their advantage. I have a few guesses at what those industries are, but a big problem with that is that North Americans in general seem standoff-ish towards the idea of new ideas, crossing the chasm if you will. If only attitudes to innovative ideas moved as quickly as stock market corrections, we'd be set!