Graham King

Solvitas perambulum

On the American automobile industry

finance misc
Summary
Joshua-Michéle Ross argues that the U.S. government's bailout of General Motors, Chrysler, and Ford illustrates "the privatization of profit and the socialization of loss," as these companies, deemed "Too Big To Fail," have consistently avoided true free-market competition. Ross highlights that the "Big Three" auto manufacturers have formed an oligopoly, resisting innovation and manipulating public policy for short-term gains. Commenters suggest that to avoid future bailouts, these massive companies should be broken into smaller entities, ensuring they can't again hold the economy hostage by their sheer size.

Joshua-Michéle Ross at O’Reilly Radar writes about the money the American taxpayer (government) is giving Genera Motors, Chrysler and Ford to save them from bankruptcy:

This is the privatization of profit and the socialization of loss. The very concept of “Too Big To Fail” points to a deeper truth: the U.S.’s auto industry does not operate within the “free market” at all. Far from it. As their moniker suggests, the “Big Three” are an oligopoly with a long record of eschewing innovation ( electric cars, hybrids etc.), killing off alternatives like mass transit and bullying public policy (lobbying against CAFÉ standards, environmental and tax policies [Hummer owners get a $34K tax credit!], the threat of relocating factories etc.) all in an effort to conform the not so “free market” to its lumbering non-strategies of pursuing short-term profit. Full article: Catch 22: Too Big To Fail, Too Big To Suceed

The consensus in the comments to that article is that if the government is saving a company that is too big too fail, it should be split up into several smaller companies, so that we only ever have to save it once.