Governments are starting to do scary things with the auto and financial sectors. As Terence Corcoran of the National Post points out, there are risks in the auto bailouts (the web page with this article has disappeared since the time of writing).
Our current financial mess was caused by banks lending money to people who couldn’t pay it back. It’s ironic that governments are now pressuring banks to lend money to individuals more liberally. The thinking seems to be that banks should lend money to people who are poor credit risks so that they can buy bad cars. That should solve our problems.
The only way I can see for the banks and car companies to be run any worse would be to have the government taking an active role. Any step toward a planned economy is a bad step.
The role of government in the economy should be to set the rules, enforce the rules, and reign in market participants who wield too much power. If the government wants to encourage greener cars, it should do this by creating tax incentives. By propping up the big three car companies directly, the government is making life more difficult for new aspiring car companies. These companies exist and are much more likely to produce green cars than the big three automakers.
The basic problem with the big three automakers has little to do with the recent financial bubble. They make bad cars. Asian car companies make much better cars. It’s that simple.
General Motors, Ford, and Chrysler are too bloated and uncompetitive for it to be realistic to save all their employees’ jobs. Parts of each (or all of one) should go, but that is unlikely to happen. Much more likely is for us to step closer to a government-planned economy.