Kevin Williamson of National Review Online looks back at the decade of evidence surrounding the government bailouts of 2008.
General Motors just shared some very bad news: It is closing five factories in the United States and Canada, eliminating 15 percent of its work force (and 25 percent of its executives), and getting out of the passenger-car business almost entirely to focus on SUVs and trucks. President Donald Trump threw a fit, but GM shrugged him off. The facts are the facts.
What did U.S. taxpayers get for their $11.2 billion bailout of GM? About ten years of business-as-usual, and one very expensive lesson.
Bailouts don’t work.
Never mind the moral hazard, the rent-seeking, the cronyism and the favoritism, and all of the inevitable corruption that inevitably accompanies multibillion-dollar sweetheart deals between Big Business and Big Government. Set aside the ethical questions entirely and focus on the mechanics: Businesses such as GM get into trouble not because of one-time events in the wider economic environment, but because they are so weak as businesses that they cannot weather one-time events in the wider economic environment. …
… So, things are grim for GM.
On the car front, anyway. GM has a much healthier business selling trucks and SUVs, a business that it now will focus its resources on — as it should have done long ago. Why didn’t it do that?
In part, because we — you and me, suckers — paid them not to. We were told that we simply must bail out General Motors during the financial crisis because if we failed to, that would lead to a bloodbath of job losses and cascading business failures. But the job losses were always going to come: Paying people to build things that consumers don’t really want isn’t a sustainable business model. That’s a reality you cannot bail your way out of.
