Economic Darwanism: the loss of compassion

Hi Stephen,

Eventually those folks would find employment in more productive segments of the economy. There's no denying there will be some pain felt, but better to get it out of the way early, rather than having society subsidize a non-productive group of companies for who knows how many years. Toyota, Honda, Nissan, BMW and others aren't looking for a handout. Your company and my company aren't getting one, and as taxpayers we'd ultimately be footing the bill (the Ontario government here in Canada announced they'll spend up to $3.4 billion, conditional on the US doing the same).

If money is to be spent, I'd rather see it go for skills upgrading and retraining of the unemployed, so that they can fill the new types of jobs that are being created. That's an investment in "human capital"that will mean higher wages (and higher taxes for the government over their lifetime), because employees can better compete internationally and are more productive. Instead, politics is leading to a misallocation of precious resources.

The economy as a whole can't simply magically do better by throwing taxpayer money at the problem. The fundamentals that determine how well an economy performs are 1) the skills and education of its labour force and 2) the productiveness of its infrastructure (machinery,etc.). If they're going to give money to those automakers, they better have firm commitments on #1 and #2 (e.g. improving technology in cars,making them more fuel efficient, raising CAFE standards, etc.). But,frankly, they've been so mismanaged that it might just be better to let them face bankruptcy so that more productive companies (Japanese,Koreans, Germans, etc.) buy up their assets and redeploy them more effectively. In the past 10 years, people have been buying bigger houses (i.e. consumption goods), whereas others have been investing in productive capital goods (machinery, technology, factories, etc.).It's no surprise that the latter are now doing well (e.g. China),whereas the US has massive deficits that are paid for by foreign bondholders.

Happy holidays,

George
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Sometimes people are rejected not because of what they did, but because of what they might do or fail to do.