USA is considering bailing out the three major automakers in the US – Ford, GM and Daimler-Chrysler. Whatever little I had learnt about this had led me to come to the logic that this bailout, even though apparently encouraging a failing concern, was unavoidable at this present juncture.
I thought that a plummeting auto industry would have a wide-spread impact on the economy as a whole. People losing jobs in the auto industry, which, let’s face it, directly or indirectly employ literally millions, would reduce their buying powers, thus affecting producers of other commodities and services, and hence slow the economy down even more. Essentially a vicious cycle. Or so I thought.
This piece has led me to start thinking otherwise. It’s interesting. Go read!
In particular, I was struck by the following lines in the write-up (as did Russel Roberts at Cafe Hayek):
Bailing out the Big Three is subsidizing failure. And you only subsidize something when you want more of it.
(Link via Cafe Hayek).