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For those critical of the 2008-2009 bailouts, GM or any other automaker with manufacturing operations in North America going belly up would have contributed to

For those critical of the 2008-2009 bailouts, GM or any other automaker with manufacturing operations in North America going belly up would have contributed to an even larger disaster. It's not just the main plants that would be affected, but also the entire supply chain - from mom & pop shops up to the big component manufacturers located in clusters across the country, not to mention GE, National Instruments, Intel, and myriad manufacturing-focused startups.

mdgrech23 8y ago
The short term impact of letting the automakers fail would have been rough but in the long term we would have ended up with a more competitive economy.
- lawnchair_larry 8y ago
  That’s quite a bold claim. You must be one hell of an economist to just assert something like that.
  - tonyedgecombe 8y ago
    It's not hard to see that proving up failing businesses leads to inefficiency. Why bother making a more competitive product if you know the government will save you with bailouts or tariffs.
  - joshstrange 8y ago
    To be fair (and I really don't have a dog in this race) > GM or any other automaker with manufacturing operations in North America going belly up would have contributed to an even larger disaster Is an equally bold claim and is often asserted without citing a single thing.
  - cryptonector 8y ago
    It's a standard position for Chicago or Austrian school economists. It's also how every crisis was handled until the Great Depression. Then we resorted to massive intervention to prevent liquidation. This experiment was repeated in the 90s in Japan, leading to two lost decades of economic growth. We don't seem to want to learn.
tomjen3 8y ago
That's basically what will happen now, except the tax payer is also in the hole.
linuxftw 8y ago
Most people have a very simplistic view of the GM bailout, it was not like the bailout of the banks. GM was allowed to fail, shareholders and senior creditors took a loss in favor of unsecured creditors (Union Pensions were stuffed with GM funny-money bonds). The feds completely disregarded the law and simply did what they thought was politically expedient (bailing out the unions). What should have happened: GM Fails, GM assets inevitably acquired by someone else. Business involves risk, taxpayers shouldn't subsidize that risk.
- cryptonector 8y ago
  A voice of reason. Thank you. Yes, liquidation is the answer when the patient is insolvent and bankrupt. In a systemic crisis, however, our bankruptcy courts cannot move fast enough. That is a problem that needs to be tackled, otherwise scared politicians will always have enough time to reach for bailouts.

mdgrech23 8y ago

The short term impact of letting the automakers fail would have been rough but in the long term we would have ended up with a more competitive economy.

lawnchair_larry 8y ago
That’s quite a bold claim. You must be one hell of an economist to just assert something like that.
- tonyedgecombe 8y ago
  It's not hard to see that proving up failing businesses leads to inefficiency. Why bother making a more competitive product if you know the government will save you with bailouts or tariffs.
- joshstrange 8y ago
  To be fair (and I really don't have a dog in this race) > GM or any other automaker with manufacturing operations in North America going belly up would have contributed to an even larger disaster Is an equally bold claim and is often asserted without citing a single thing.
- cryptonector 8y ago
  It's a standard position for Chicago or Austrian school economists. It's also how every crisis was handled until the Great Depression. Then we resorted to massive intervention to prevent liquidation. This experiment was repeated in the 90s in Japan, leading to two lost decades of economic growth. We don't seem to want to learn.

tomjen3 8y ago

That's basically what will happen now, except the tax payer is also in the hole.

linuxftw 8y ago

Most people have a very simplistic view of the GM bailout, it was not like the bailout of the banks. GM was allowed to fail, shareholders and senior creditors took a loss in favor of unsecured creditors (Union Pensions were stuffed with GM funny-money bonds). The feds completely disregarded the law and simply did what they thought was politically expedient (bailing out the unions). What should have happened: GM Fails, GM assets inevitably acquired by someone else. Business involves risk, taxpayers shouldn't subsidize that risk.

cryptonector 8y ago
A voice of reason. Thank you. Yes, liquidation is the answer when the patient is insolvent and bankrupt. In a systemic crisis, however, our bankruptcy courts cannot move fast enough. That is a problem that needs to be tackled, otherwise scared politicians will always have enough time to reach for bailouts.