Posted by Kromey at 7:22pm May 2 '12First of all, you're cherry-picking -- sure, Chrysler is up, but Ford and GM are both down. That one out of the Big Three is up is hardly validation that throwing huge wads of cash at all three was a good thing. (Okay, to be fair, Ford was "only" offered the cash; I don't think they actually took any, just used that promise as a safety net. Point still stands, though.)
Secondly, that giant wads of free cash carried a business through when it otherwise would have (might have) failed outright does not mean that it helped an economic recovery. Think about it for a moment: If a big industry is sinking, and pulling down other sectors of the economy, what's the impact to the rest of the economy if they continue that pull, versus if they're cut loose (i.e. allowed to fail) so that the rest of the economy can immediately begin picking up the pieces?
It's the "zombie debtor" premise, a solid concept that we readily accept when it comes to individuals but suddenly turn a blind eye to when the government kow-tows to industry lobbyists trying to rescue their own cushy jobs.
Thirdly, you're ignoring the opportunity cost of buoying those falling companies. Not just the opportunity cost to taxpayers while their money was tied up in those low-to-no-interest "loans" (although the batshit insane notion that the government can spend spend spend regardless of what they actually have does reduce that impact), but the opportunity cost to the market itself: time and time again, throughout history, when a big business fails someone else swoops in -- oftentimes with novel new ideas that the status quo would never have introduced to the market -- and it becomes a win-win for the new business and consumers. As just one example, consider IBM's fall from dominance in the fledgling home PC market, paving the way for Microsoft to bring the revolutionary notion of a graphical user interface to your living room. Or consider the fall of Atari from the gaming console market, allowing Nintendo to step in, and eventually opening the door to Sega, Sony, and eventually Microsoft (again).
Who's to say that artificially holding up Chrysler and GM didn't keep the doors closed to a radical new car company that could have revolutionized the industry?
It's a fact that companies come and go. It's also a fact that when a company is big enough that its failure produces a hole in the market, others rush in to fill the void with their new ideas; some of them make it, others fail, and in the end the market in general and consumers in particular reap the rewards.
Secondly, that giant wads of free cash carried a business through when it otherwise would have (might have) failed outright does not mean that it helped an economic recovery. Think about it for a moment: If a big industry is sinking, and pulling down other sectors of the economy, what's the impact to the rest of the economy if they continue that pull, versus if they're cut loose (i.e. allowed to fail) so that the rest of the economy can immediately begin picking up the pieces?
It's the "zombie debtor" premise, a solid concept that we readily accept when it comes to individuals but suddenly turn a blind eye to when the government kow-tows to industry lobbyists trying to rescue their own cushy jobs.
Thirdly, you're ignoring the opportunity cost of buoying those falling companies. Not just the opportunity cost to taxpayers while their money was tied up in those low-to-no-interest "loans" (although the batshit insane notion that the government can spend spend spend regardless of what they actually have does reduce that impact), but the opportunity cost to the market itself: time and time again, throughout history, when a big business fails someone else swoops in -- oftentimes with novel new ideas that the status quo would never have introduced to the market -- and it becomes a win-win for the new business and consumers. As just one example, consider IBM's fall from dominance in the fledgling home PC market, paving the way for Microsoft to bring the revolutionary notion of a graphical user interface to your living room. Or consider the fall of Atari from the gaming console market, allowing Nintendo to step in, and eventually opening the door to Sega, Sony, and eventually Microsoft (again).
Who's to say that artificially holding up Chrysler and GM didn't keep the doors closed to a radical new car company that could have revolutionized the industry?
It's a fact that companies come and go. It's also a fact that when a company is big enough that its failure produces a hole in the market, others rush in to fill the void with their new ideas; some of them make it, others fail, and in the end the market in general and consumers in particular reap the rewards.
It validates nothing - Kromey