Don Boudreaux of Cafe Hayek writes letters to newspapers, copying them to the site he and other economists from George Mason U. operate. His latest, to Wall Street Journal, demurs from WSJ auto-industry writer Paul Ingrassia’s joy in what he says is the successful bailout of GM and Chrysler.
A year and a half is not long enough to draw such a conclusion, says Boudreaux.
Second – and more importantly – the chief economic case against the bailout was not that huge infusions of taxpayer funds and special exemptions from bankruptcy rules could not make G.M. and Chrysler profitable. Of course they could.
Yes, throw money at a money-shortage program and you get results.
Instead, the heart of the case against the bailout is that it saps the life-blood of entrepreneurial capitalism. The bailout reinforces the debilitating precedent of protecting firms deemed ‘too big to fail.’
How so?
Capital and other resources are thus kept glued by politics to familiar lines of production, thus impeding entrepreneurial initiative that would have otherwise redeployed these resources into newer, more-dynamic, and more productive industries. [italics added]
It’s a play-it-safe solution, a conservative one, as opposed to a classical liberal one that respects and encourages ingenuity. One that Friedrich Hayek would recommend.
In short:
The ‘success’ of the bailout is all too easy to engineer and to see. The cost of the bailout – the industries, the jobs, and the outputs that are never created – is impossible to see, but nevertheless real.
What can be seen, on the other hand, is continued high pension and benefits for members of the United Auto Workers, a union that loves Dems because they protect their (narrow) interests.
Blithe Spirit 