The crisis on Wall Street is causing the federal government to look differently at its investments. Obviously the major investment for almost a decade now has been the Iraq war which has contributed to the government being left deep in debt and lacking focus on domestic finances. Now after massive bank failures corporate bankruptcies and tragedies in the stock market it seems the federal government is finally taking notice. But is it really the job of the legislators to ensure the survival of these specific industries?
Domestically cars have been a staple of the American industry. Ford manufactured the first mass-produced cars in the United States which became popular in the early 1900s. As with almost every industry imaginable non-American companies soon became competition. Within the century-long episode of the auto industry car companies have changed so dramatically that it is becoming difficult to follow.
General Motors is the largest auto conglomerate in America and the second largest in the world. It consists of a brigade of smaller companies including Pontiac Cadillac Hummer and Saturn. The car-selling giant has tried for months to suppress talk of its impending bankruptcy but the company’s fate took a turn for the worst last month. It is now apparent the company needs more than a miracle to pull out of this dive before its imminent crash and burn and legislators are proposing to make the federal government its savior.
So why bail out this single failing company? Capitalism is supposed to be like Darwinism – the weaker companies die out. But much more is at stake if the auto giant goes under.
Every American auto company is dependent on third-party suppliers for components like parts manufacturing and subassemblies. If these smaller companies lose their business from GM then they also die out along with the other major domestic auto companies that are equally dependent on the same small companies. In the pessimist’s viewpoint the entire domestic auto industry is dependent on GM’s survival through this economic crisis.
Let’s say the federal government steps in and saves the day. Then what? The feds get a pat on the back and legislators get a smile on their faces only to walk out the door to find a gang of other failing businesses demanding a bailout too.
Setting such a precedent is dangerous but so is letting the auto industry die.
The auto bailout should be for the benefit of the American people. In legislative terms this bailout is more of a hefty loan to GM which should be paid back to the taxpayers with interest. (In the form of free cars maybe? Doubtful but one can dream.) Yet the ripple effect of denying these loans would mean the loss of more than a million American jobs. It would also turn practically the entire city of Detroit into an economic wasteland with a massive rise in the national unemployment rate to boot. And let’s not forget the ego meltdown we Americans would face if our own auto industry – the one we nurtured from infancy – was ripped away from us.
Many politicians are anxious about the lack of support behind this auto bailout. The money needed for the loans would be allocated from the $700 billion economic bailout package that was already approved but it seems as though the votes are failing to carry this through.
All three of the American auto giants – GM Ford and Chrysler – are tirelessly lobbying to get this legislation passed but so far few Republicans are on board. Some politicians are waiting to see what steps President-elect Obama will take when he enters office yet it may be too late for the quickly deteriorating GM.
Only time will tell for certain but it is very possible that American cars will no longer be made in America.