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Contentions

Not Everything Can Be “Saved”

Roger Cohen writes in defense of dynamic capitalism:

Pan Am, which had been a leading U.S. international airline since the 1930s, collapsed in 1991. Like other great U.S. companies, it died in the marketplace because it blundered. Churn — of people and businesses — has always defined America. Nobody subsidized U.S. Steel or the automaker Packard in the belief that the world without them was unthinkable.

Coming to the United States from Europe, I found this constant reinvention bracing. Look at the top 40 companies by market capitalization in Europe and most have been there for decades. Not in the United States, land of Google and eBay. Churn requires death as well as birth. The artificial preservation of the inert dampens the quest for the new.

America let Pan Am die. Italy keeps Alitalia going although the airline’s been a dead man walking for years. There you have it: two continents, two business cultures. At least until recently, when the sheer extent of the U.S. financial collapse led the Treasury to discover forms of life-support that refuse to utter a taboo word — socialism — but resemble it nonetheless.

Let’s face it, the American International Group has no right to be around, if risk, markets, transparency, accountability and other foundations of American capitalism mean anything.

Which brings us to Grand Theft Auto, not the video game, but the ongoing drama starring General Motors and Chrysler in a desperate quest for billions of dollars of taxpayers’ money that they say is essential to their survival. (Ford has said it does not need federal money now to survive; it’s in somewhat better shape.)

I know, hundreds of thousands of jobs are directly at stake, hundreds of thousands more indirectly. This is not an economy that’s creating new jobs for those lost. Why should autoworkers get worse treatment than bankers?

These are agonizing questions. But it’s equally agonizing to contemplate the United States becoming the land of Alitalia-style life-support rather than Pan Am-style churn. If the Big Three, their heads in the sand, have made the wrong models with the wrong technologies for years, while their competitors adapted to a changing world, at least one must pay the price.

And, of course, the alternative in the case of  the U.S. car companies – a government managed, subsidized and money-losing car industry – is the worst of all worlds. Indeed the image of Hank Paulson, who lacks any expertise in managing an industrial enterprise and already has a poor record in the “picking winners and losers” department, playing “Car Czar” is ludicrous. (One wonders if he knows much about negotiating when he declares up front that the companies are getting the money and won’t be going home empty-handed.)

A Paulson-devised bailout conveys the wrong message to risk takers and managers (“Don’t worry, the government is here for you.”) But that’s not the worst of it. It robs the taxpayers of money that should go to something else –  for example, investment in companies that will profit, employ more workers and create wealth. (Yes, it is the taxpayers’ money we’re still talking about — that mound of debt will have to be repaid by current and future generations.)

Lost in the “UAW vs. Republicans” argument is a more fundamental one: a car bailout is a perfectly horrid use of taxpayers’ money. Rather than asking if we should bailout the car companies, a better question would be: isn’t there something better to be done with tens if not hundreds of billions of dollars? Certainly we can come up with something better than a batch of nationalized Pan Am’s.



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