Rattner is the former head of the Obama Administration's "Presidential Task
Force on the Auto Industry," otherwise known as the "car czar." In that role he
presided over the bailout and restructuring of General Motors and Chrysler in
on the comedy show "The
Colbert Report," Rattner portrayed the possible failure of these two companies
in very drastic terms:
they hadn't gotten their money, they would have closed their doors, they would
have liquidated. A million people would have been out of work. And by the way,
the suppliers would have shut down. And after that, Ford would have shut down
because they wouldn't have been able to get parts. And after that, the Japanese
companies would have shut down because they wouldn't have been able to get
other words, in Rattner's view not bailing out two
private companies that employed a total of just over 150,000 people would
have devastated the entire American economy. An economy, by the way, that has seen
total employment fall by some 8 million since the jobs peak in 2007.
a thought experiment, what if it weren't two of the Big Three seeking taxpayer
bailouts, but say, Wal-Mart?
employs 1.3 million people; it's the largest private employer in the world and
the second largest employer public or private, surpassed only by the U.S.
government. Bankruptcy would mean hundreds of thousands of lost jobs and the
disruption of tens of millions of lives. By any objective measure, the collapse
of Wal-Mart would be far more devastating than the final demise of GM or
this mean that should Wal-Mart ever find itself in a similar death spiral it
too should receive a taxpayer bailout? Most Americans would say not, and
generally accepted economic theories back them up.
destruction" is an important concept for any dynamic, free-market economy.
It's a fancy term for saying that some decrepit companies have to go out of
business in order to free up resources so that more efficient and innovative
ones can grow. In essence, short term pain results in long term gain.
the case of GM and Chrysler, had
they gone bankrupt under a rule-of-law proceeding rather than a political one,
resources would have been unlocked and become available for less hidebound,
faster growing industries and firms. The companies themselves may well have
survived in smaller, more efficient form, and in any event car buyers would
still have had access to vehicles from Ford, Toyota, Honda, and others, many if
not most made in domestic factories
Rattner may not accept that characterization of U.S. automakers as
"hidebound." Specifically, he argues that GM and Chrysler's unionized
UAW above-market compensation
packages and destructive work rules had nothing to do with the companies'
troubles. Instead, he blames management decisions for the companies' failure:
didn't go bankrupt [despite having the same union]," Rattner said. "Why didn't
Ford go bankrupt?"
better question might be, "Why didn't any of the Japanese, Korean or other foreign
automakers go bankrupt?" These car companies compete in the same economic
environment, minus the militant unions.
of where the fault lies, no politician should ever have the power to use
taxpayer money to play favorites.
Jarrett Skorup is the research associate for online
engagement at the Mackinac Center for Public Policy, a research and educational
institute headquartered in Midland, Mich. Permission to reprint in whole or in
part is hereby granted, provided that the Center and the author are properly