reads Tom Friedman and wonders why.
I guess Friedman doesn’t like bailing out the Detroit Three which collectively sell millions of vehicles in the U.S. when we could get in on the ground floor with start-ups with interesting ideas but which otherwise sell none. Maybe it’s the CRE bust talking, but Friedman’s imagery is not exactly spot-on:
[O]ur 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.
So eBay was founded in 1995; meanwhile the Direct Marketing Association, in its effort to forestall (for better or worse*) do-not-mail initiatives, says that there’s nevertheless about $700 billion per year in U.S. commerce associated with direct mail marketing. So it’s not so obviously stupid to spend some billions in a pinch to preserve that output and the hundreds of thousands of associated jobs.
Then to try to show what dinosaurs the Three are, Friedman writes:
Remember, in 1908, the Ford Model-T got better mileage — 25 miles per gallon — than many Ford, G.M. and Chrysler models made in 2008.
Now anyone with half a brain can look up the Wikipedia entry, which in turn links to a Ford page that contends that the 20-hp engine in the 1,200-lb. Model T actually turned in 13 to 21 miles per gallon. (“Desk Set” truly is ancient history.) Moreover a 25 MPG vehicle of 2008 offers such amenities as performance, comfort, and safety! Not only that, but the Ford Focus or Chevy Cobalt of today not only are superior in every automotive way, but even cost less, adjusted for inflation, than the $850 (nominal) 1908 Model T. While the U.S. industry hasn’t exactly been ahead of the curve in developing efficient and marketable cars, and the cost of their neglect of the bread-and-butter car market is substantial, to suggest that they’re necessarily doomed is ridiculous.**
An important point that seems to have been lost in the auto bailout debate, made here by Save_The_Rustbelt not too long ago, is that Ford and GM pretty much had restructurings in progress as of the start of the tailspin which, while not a sure thing, nevertheless were reasonably calculated to put them on the right course by the tweens. When hundreds of billions of dollars are thrown around to try to rescue the economy from bets that shouldn’t have been made in the first place and which appropriate prudential regulation will prevent later suckers from making at some future date, putting a few tens of billions at risk to stop a big chunk of manufacturing from imminent collapse is far from the stupidest thing in the world.
* Advertising mail might not exactly be popular, but it helps keep Netflix and occasional thank-you notes to “Grandma Millie” cheap.
** Chrysler LLC possibly excepted.