The Auto Industry

Apr 3, 2009 by

The American auto industry has been struggling? Should we care? To answer this question, I would like to explore what the auto industry, or for that matter, any industry provides. Industries provide:
-Jobs
-Taxes
-Products or services

So, what happens to these three benefits when an industry domestically disappears? There are two ways for an industry to disappear. The first way is for the plants and workers of an industry to be bombed out of existence. When this happens, there is a loss of jobs, taxes, products, and services. Unfortunately, this “obliteration” approach is often taken by politicians. Fortunately for all of us, no one is dropping bombs on factories.

Instead, when a firm dies, the consequences are far milder. Although people lose their jobs, they do not necessarily become unemployed. In reality, they likely find less preferable jobs elsewhere. (If the alternatives were better, the employees would have switched without a closure.) Rather than being abandoned, the factories may fall into other uses. Competitors may view them as an inexpensive means for expanding capacity.

If factories are not abandoned and former workers are not unemployed, the tax consequences are far milder than if a bomb had exploded. Although both may be put to a slightly less productive use after the bankruptcy, it is highly likely that both will be put to use.

Finally, a corporate failure results in the loss of products and services. If the American car was so sacred, why weren’t Americans buying enough of them to sustain American automakers? The answer is likely that people like the idea of the American car, but not the act of purchasing one. I do not feel that public money should be used to atone for this sort of hypocritical consumer behavior. If and when the automakers fail, we we will buy the cars we always have; foreign ones.

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