Save the Big Three, Kill the U.S. Auto Market
December 4, 2008
Washington, D.C.--Advocates of a bailout for the Big Three claim that if we allow these giants to fail, it will destroy the U.S. auto industry. “In fact,” said Alex Epstein, an analyst at the Ayn Rand Institute, “it is the bailout, a veritable marriage between Detroit and Washington, that will destroy the U.S. auto industry.
“The Big Three have no right to demand that taxpayers risk money on them when private investors won’t. They do, however, have a right to demand the repeal of the policies that have helped destroy the auto industry. These include the labor laws that have forced them to acquiesce to economically catastrophic UAW demands, and fuel economy laws that have forced them to produce small cars that they can’t profit from given their labor costs. Indeed, the Big Three should have done this long ago--so that they would have been free to produce desirable cars at a profit in America, just as they do in scores of countries around the world.
“But instead of demanding their freedom and making a case to the market, the automakers are surrendering even more of their freedom to the government in exchange for taxpayer money. They have met Congress’s demand to commit to producing more small cars--even though it is small cars that have bankrupted the companies in the first place.
“By seeking handouts, not freedom, the auto industry is helping to destroy any remnant of a genuine auto market. In a real market, free companies would make money by producing the cars that free individuals judge best. In the new pseudo market, companies will make money by collecting taxpayer dollars in exchange for making whatever cars Washington tells them to. If this is what it means to save the U.S. auto industry, then the industry should die, and then real, freedom-seeking, profit-making companies might emerge.”
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Alex Epstein was a writer and a fellow on staff
at ARI between 2004 and 2011.