Roubini Advocates Nationalization Of Auto Industry
You know, Nouriel Roubini is smart. I’ve long believed that we should never treat those in opposition* like dullards, because that leads to sloppiness in fighting them. But I just don’t know how a smart person — an economist — can advocate the nationalization of our auto industry with a straight face.
“We’re spending $2 trillion to bail out financial institutions,” the economist notes. “What’s the fairness of not giving say $50 billion of low interest loans to automakers to help them restructure?
But Roubini is no ally of the auto industry CEOs currently making their case in Congress. He says any government aid must be “highly conditional” and only occur after a prepackaged bankruptcy that includes:
- Replacement of current management
- Concessions from both the UAW and automakers
- A wipeout of existing equity and debt-holders
- Temporary nationalization of the auto industry
The appointment of a “car czar” is clearly a touch subject but Roubini says those worried about moral hazard and issues like free enterprise are fighting the last war.
“There’s already massive amounts of government intervention in the economy, we’ve [crossed] that bridge,” he says. “The question now is, what are we doing to do right? If it takes an auto czar to really structure these firms, so be it.”
Have our “drug czar” or “poverty czar” or “education czar” ever solved a damn thing in their respective fields? No? So why think that an “auto czar” would actually improve things. Who’s to say that — once they get their hands in the cookie jar — the nationalization of the industry would be “temporary”? While it may not be a de jure nationalization in the future, I could see the industry going the way of the GSE’s, nominally private but publicly regulated.
Roubini seems to be offering the argument that only nationalizing some industries while letting others fall is “unfair”, as if nationalizing anything is fair. He wants the government to come in and bail out the automakers — throwing their owners [the shareholders] out the door — and take over… Just like Fannie… And he actually thinks this is a good idea?!
I’m sticking with my original instinct — let them survive or fail, hit bankruptcy if necessary, and go through the painful but required reorganization according to market economic principles. If you put an auto czar in charge, the reorganization will be done according to political principles, and we taxpayers will be saddled with these industries — and all the protectionism that goes with state-owned industries — for perpetuity.
* Of course, I wouldn’t necessarily consider Roubini in “opposition”, as an academic economist. He was rather prescient about not only the cause but the shape of our current financial meltdown. However, when someone suggests that we should have Washington appointees try to fix our ailing auto industry, I consider that a point worth opposing.