Friday, November 14, 2008

David Brooks Gets it Right on Big 3

David Brooks of the New York Times writes his column today on the potential bailout of the Big 3 automakers. While I disagree with his sentiments for a broad social safety net he has a number of good points directly relevant to the issue.

Over time, American government built a bigger safety net so workers could survive the vicissitudes of this creative destruction — with unemployment insurance and soon, one hopes, health care security. But the government has generally not interfered in the dynamic process itself, which is the source of the country’s prosperity.

Granting immortality to Detroit’s Big Three does not enhance creative destruction. It retards it. It crosses a line, a bright line. It is not about saving a system; there will still be cars made and sold in America. It is about saving politically powerful corporations. A Detroit bailout would set a precedent for every single politically connected corporation in America.

In short, a bailout will not solve anything — just postpone things. If this goes through, Big Three executives will make decisions knowing that whatever happens, Uncle Sam will bail them out — just like Fannie Mae and Freddie Mac. In the meantime, capital that could have gone to successful companies and programs will be directed toward companies with a history of using it badly.

He goes on to rip Obama. (I know! A liberal columnist at the New York Times writing something critical of Obama. Surely a sign of the apocalypse)

The second part of Obama’s plan is the creation of an auto czar with vague duties.

Are we really to believe there exists a czar omniscient, omnipotent and beneficent enough to know how to fix the Big Three? Who is this deity? Are we to believe that political influence will miraculously disappear, that the czar would have absolute power over unions, management, Congress and the White House? Please.

Come on David, take this argument to its logical end. It's Hayek's Fatal Conceit on display. The government cannot successfully run any part of the economy. The knowledge of a few planners cannot supercede that of millions of individuals.

No comments: