A GM essay worth reading

As a follow up to the series of commentaries I’ve posted here, building on this post from the other day, there has been so much news about the second round of hearings over the auto industry crisis and the desired bailout… it’s too frustrating to me to try to cover it. The blackmail of the taxpayer, to the tune of $75 to 125 billion, makes me cringe – the Detroit firms, their elected advocates, and their unions have such nerve to demand the country pay for their shortsighted weakness.

One of the Freakonomics authors pointed to an interesting essay last week. Written by  Josh Rauh and Luigi Zingales, it can be found here. An excerpt follows:

If the US government provides GM with a $25 billion loan that allows it to continue operating under current conditions for another year or two, the money would simply be wasted and the problem postponed. GM would still be completely unable to survive in the long term. We are very sympathetic towards the pain of the hundreds of thousands of workers whose jobs are at stake. It is precisely because we are concerned about their long term welfare that we oppose a bailout. Throwing money at a drug addict only enables the addict to continue abusing drugs and ultimately shortens his life. Similarly, government money aimed at a company that needs restructuring enables it to avoid taking responsibility of its future, condemning it to a certain death.

Advertisements

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s