Don’t Bail Out U.S. Automakers--Untie Them
November 20, 2008
Washington, D.C. --Politicians across the spectrum are calling for an auto bailout, arguing that we cannot allow such large companies to fail.
“If U.S. automakers cannot find a market fix for their problems, they must fail,” said Alex Epstein, an analyst at the Ayn Rand Center for Individual Rights. “They should go through bankruptcy proceedings so that creditors and owners can redeploy their assets as efficiently as possible.
“Every day these companies remain in existence in their current form, they are destroying shareholder wealth and wasting worker effort. To preserve these companies with a bailout would be obscenely unfair. Every dollar of a bailout would come at the expense of those who did nothing to cause the auto mess.
“There is one thing the government does owe the auto companies, however: freedom. For example, however the industry shakes out, automakers must be liberated from CAFE fuel economy laws that arbitrarily dictate what kind of cars they must sell, forcing them to sell millions of small cars that have no chance of profitability given consumer preferences. The auto industry must also be liberated from the Wagner Act, which gives unions the coercive negotiating power that railroaded the Big Three into their lavish, unprofitable wage and health plans. If a liberated Big Three can rejuvenate themselves, great; otherwise, a liberated next generation will be able to succeed where they failed.
“Economic freedom is what created the American automotive industry and made it the envy of the world. Economic freedom is the only thing that can bring it back.”
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Alex Epstein was a writer and a fellow on staff
at ARI between 2004 and 2011.