In response to my post yesterday, decrying the fact that Republican Senators from Southern states with foreign car manufacturers fiercely oppose the proposed emergency loan to save American automakers Ford, General Motors and Chrysler, I received several comments supporting the Senators and attacking the auto workers unions.
Worried about what the failure of one of the pillars of American industry would do to our economy, even to our society, I crudely answered one comment as follows:
I am sure some “no-mercy-for the automakers proponents” will come up with all kinds of esoteric rationale for letting our vital auto industry fail. As our financial/economic crisis then rapidly snowballs into a real depression and perhaps they themselves, their relatives, their friends stand in the 2009 equivalent of our past soup lines, such high-minded clinical analysis will be of little consolation.
In addition to the poor style and grammar, such a comment from an amateur blogger probably did not make a very big impression.
Fortunately, more “experienced hands” came to my rescue this morning in the shape and form of none other that Op-Ed Columnist Nicholas D. Kristof.
In his New York Times Op-Ed “A Finger in the Dike,” Kristof says what I would have tried to say—if I had a fraction of the talent and experience Kristof has.
So here it goes, my thoughts through Kristof’s talent lens and in Kristof’s words:
Look, there are plenty of sound arguments against a bailout. But there’s a practical argument that trumps everything: when conditions are so fragile, we can’t risk a staggering blow to the national economy. When you see a hole in the dike, don’t discuss the virtues of laissez-faire policies — plug it!
There were also sound arguments for not rescuing Lehman Brothers. So the government allowed Lehman to collapse — and almost everybody now recognizes that it was a mistake that cost taxpayers more than a bailout would have.
Lehman Brothers was small potatoes — a tiny French fry — compared with America’s automakers. Lehman Brothers had 25,000 employees worldwide; General Motors alone has 250,000.
The Big Three have almost 400,000 employees worldwide, including about 230,000 in the United States. In addition, several hundred thousand people make car parts for the Big Three, and a half-million more sell or distribute cars from them. All told, considerably more than one million jobs in the United States depend directly on the American automakers, and many more indirectly.
Kristof then cites some of the reasons we have heard ad nauseam for “washing our hands of the auto companies” and refutes each and everyone of them.
The final reason cited by Kristof to do nothing is: “A bailout is hopeless: This is a bridge loan to nowhere.”
And Kristof agrees—with caveats and conditions:
Yes, the Obama administration will have to come back in January with a full rescue package. The package should focus on saving jobs, not stockholders or bondholders. Shareholders should lose most of their investments, bondholders should get a haircut, managers and board members should be ousted, autoworkers should have their pay and benefits trimmed to market levels, and taxpayers should get an equity stake that they could profit from.
But saving the auto sector isn’t hopeless. Car companies have made progress in recent years, as underscored by the Chevy Volt, a plug-in hybrid that can go 40 miles without using a drop of gas. (The catch is that if gas prices stay as low as they are now, consumers may instead be demanding gas-guzzling S.U.V.’s.)
Think of a bailout as part of the huge planned stimulus package. It’s much cheaper to keep people in their existing jobs than to create new jobs elsewhere.
I lived in Tokyo in the 1990s, as perfectly reasonable arguments for government restraint led to acquiescence in the face of escalating economic disasters. Anyone who lived through Japan’s “lost decade” understands that the risks of inaction are greater than the risks of action.
Now, wasn’t this much more elegant, effective and convincing than my “soup lines” specter?
Thank you, Mr. Kristof, you took the words right out of my mouth.
