OUR VIEW: No handouts for Big Three
Twenty-two years ago, the late great journalist David Halberstam wrote a stunning book on the decline of the American automobile industry, specifically Ford Motor Co.
It was called "The Reckoning," and it told of how Detroit lost its way when it turned over strategic management of one of the nation's most vital industries from people who loved great cars to people who loved making as much money as they could.
Although it was published in 1986, the book foretold what is happening right now in Detroit and in Washington, D.C., where the chief executives of Ford Motor Co., General Motors and Chrysler are begging Congress and the taxpayers for billions of dollars so they can remain in business. These men run companies that for decades have built far too many cars and trucks that people didn't want, failed to make fuel efficiency and economy top priorities despite two OPEC-led oil price crises, and gave away U.S. market share to nimbler international competitors like Nissan and Toyota.
It is an American tragedy that corporations within virtually every industry, from automobiles to the media to health care, left those whose concern was short-term profitability in control of long-term strategy.
In Detroit's case, that meant building bigger and bigger cars and trucks because they had the highest profit margins — despite unmistakable evidence that the growth of economies in China and India, as well as the rest of the developing world, would drive up the cost of gasoline and steel. That, in turn, would eventually make the once-great American automobile industry a dinosaur that now stands on the verge of extinction as we know it.
And the consequences of the failure of these companies will likely mean the loss of 3 million jobs tied to supplying and serving the industry, along with the further pressure on a deteriorating national economy.
But before we, the taxpayers, are asked to shell out $25 billion or so to save these companies from themselves, we should ask ourselves this question: What's next?
Private colleges failed during the economic downturns of the 1970s and 1980s, and a lot of people worked at them. Should we bail out colleges that might fail today because not enough working-class families will be able to afford to send their children? Isn't higher education a worthy goal? Don't a lot of people work there, too?
Many newspaper companies, along with radio and television companies, are in deep financial trouble. They serve an essential role in a democracy that relies on an informed citizenry able to govern itself. Should the taxpayers be asked someday to bail out The New York Times, The Boston Globe or The Standard-Times because of unprecedented changes in technology and the manner in which people get their news? Hundreds of thousands of jobs are at stake in those businesses, too.
Congress and the White House were compelled to commit $700 billion to save the financial industry because its collapse might have precipitated a worldwide depression unlike anything we have ever known.
But that does not mean that we can — or should — ask the taxpayers to save every industry from its own bad decisions. That is, in effect, socialism, which shackles innovation of the kind that once made U.S. industry the envy of the world. American-style capitalism is a system in which the best ideas are supposed to win out. The well-run business should succeed. The poorly run one should not.
And in the case of Detroit, we have witnessed failure on a massive scale, a failure foretold 22 years ago. The taxpayer should not pick up the tab for that. From the failure of one or more of Detroit's Big Three will arise a leaner, better and more efficient industry than the one that exists today.
Something similar happened to the steel industry, remember, as one by one the behemoths collapsed under the weight of debt, high cost, old technology and fierce foreign competition.
But a new American steel industry emerged, profitable and better equipped to compete internationally. Re-invention is the genius of America, and handouts like the one for which Detroit is asking only delay that from happening.
David Halberstam warned us 22 years ago. It's time to listen.
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