The Bailout

As we’ve all heard, the auto bailout (in the US, Canada, and soon, Mexico) is going through. This is a bad move – and a very expensive one at that. You see, we’re being threatened with major economic repercussions should GM or Chrysler collapse, but we’ve not received any assurances that the money we’re doling out actually prevents this. Yes, imminent bankruptcy is staved off, but the poor fundamentals – massive legacy costs, inflexible and expensive labor agreements, overweight distribution chain, and a proliferation of nameplates – these remain, and our cash infusion prevents stakeholders from addressing them. A crisis concentrates the mind, and lack of cash is a crisis that would have wonderfully concentrated the minds of management, unions and dealers. Instead, all will trumpet that “everything is fine,” and blame the economic turmoil for their current predicament. Funny – I don’t see foreign nameplates demanding billions . . .

It’s not that I eschew strong public leadership in an economy, it’s just that we’re not getting value for money here. Chrysler will go under – it’s just a matter of when. As for GM, no one seems willing to radically streamline it. In both cases there is no concrete plan, no timeline for change. Instead, our billions will simply keep these guys on life support and prevent them from becoming viable competitors. Moreover, once we subsidize the auto makers, what can we tell forestry workers in BC, oilsands workers in Alberta, or smelter workers in Quebec when their employers come begging? Nothing. Can you imagine the resentment if governments helped workers in Ontario but ignored the pleas of those in other parts of Canada? – it would confirm the fiction that the federal government kowtows only to Central Canada. No, the bailout simply opens a floodgate, and all levels of government will run deficits to finance every open hand that passes by.

And so, what are we left with? By handing out money now, Ontarians (and Canadians) are:

  1. Preventing necessary change from occurring
  2. Opening ourselves to demands from every industry facing hardship
  3. Risking regional resentment

And for what? The jobs that we’re saving – temporarily – will come at an enormous cost to the public purse. Far better for us to spend heavily on infrastructure (our transit systems, ports and municipal infrastructure are deteriorating) and retrain workers into trades and construction. At least we’ll have something to show for it.

Comments

  1. Matt - December 22, 2008 @ 22:06

    It’s pretty sad that the majority of Canadians are so ignorant to what you have just stated.
    We should follow a more European model to our economy, and our government. Not necessarily Western European (England), but Northern European (Norway). Our downfall will be too much private capitalism and not enough privately owned entities. A perfect balance of privately and publicly owned entities is one solution to our problems in this democratic, err…capitalist society.

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