I frankly don’t know what the right call is on bailing out Detroit. On one hand, smart people are saying that not doing so could dangerously deepen the recession. On the other, if business idiocy had a three-strikes policy, these companies would be doing life. While going to school in Ohio car country in the late 1970s, I got a glimpse of the pain that area felt when the industry collapsed because it failed to adjust to a world that wanted smaller, better cars; tremendous unemployment rates, lots of idle people, most of them decent as hell, wishing they had something constructive to do. It was a monumental failure and a ghastly betrayal.
That the auto industry would repeat the same mistake (again, multiple times) so soon and so spectacularly almost defies belief. Do these people deserve another shot? Should we fool ourselves they can learn enough to turn these companies around? Evidence suggests otherwise. Their failure to learn brings to mind that Simpsons episode in which Bart — or is it Homer?– keeps reaching for a treat even though he gets shocked every time. Incapable of even the simplest conditional learning.
Anyway, Friedman, whom I often find a bit hard to take, frankly, articulates nicely here the sense that trying to save these companies would be throwing good money after bad:
Our bailout of Detroit will be remembered as the equivalent of pouring billions of dollars of taxpayer money into the mail-order-catalogue business on the eve of the birth of eBay. It will be remembered as pouring billions of dollars into the CD music business on the eve of the birth of the iPod and iTunes. It will be remembered as pouring billions of dollars into a book-store chain on the eve of the birth of Amazon.com and the Kindle. It will be remembered as pouring billions of dollars into improving typewriters on the eve of the birth of the PC and the Internet.
I’ll be deeply surprised if he’s wrong.