Bailing out Wall Street is one thing. But bailing out the auto industry — that’s a whole different story.
The push to assist the soon-to-be bankrupt “Big Three” in Detroit could be a detrimental hit to the core ideals of the nation’s free market capitalism.
Financial assistance to the country’s monetary institutions, such as banks and insurance firms, is a necessity if one fully understands the correlation between the consumer and the corporation. As much as Americans despise CEO’s misuse and abuse of their authority, they are still indirectly affected by the fall of these companies. CEOs’ should and will be held accountable according to guidelines specified within the bailout bill, but deserting these institutions at this time would negatively impact the average citizen.
The central goal of the $700 billion bailout is to “thaw” the credit freeze in sectors where banks and institutions are crumbling and unable to get credit flowing again. The disintegration of these companies could trigger a domino effect on other credit unions and insurers.
Bailing out the auto industry, however, is simply not an option. Ford, Chrysler and GM are heavily insisting on a relief package to save the companies from inevitable bankruptcies. As reported by ABC News, in these three corporations, there are possibly 240,000 jobs at stake.
Losing a large part of the American work force would be devastating, but like slapping a bandage on an artery, a bailout won’t stop the bleeding. Surgery is needed.
It is evident that the failing unions are the main source of the problem. An alternative to the economic principles behind these institutions should be devised now to avoid a dilemma that would likely only be faced again.
What the Big Three should do — like most other companies who encounter the same problem — is file for bankruptcy and restructure their companies. As disappointing as it is to see the American car industry lean toward collapse, bailing out automakers would be a mistake. That the automobile workforce makes up a large percentage of America’s employers does not validate a bailout. If these manufacturers are assisted, the workers might keep their jobs for a short time, but the assistance could still leave the company in shambles with no recovery in sight.
If Congress chooses to bail out the auto industry, where does it end? If a retail queen such as Macy’s goes bankrupt, is the government going to rescue it as well? This country is based on free market capitalism: If a business and its products are good, it will succeed. If not, it will fail.
As President George W. Bush recently stated, “Capitalism is not perfect. But it is by far the most efficient and just way of structuring an economy.”
Capitalism does not solve every economic ordeal, but a free market system is a bright light to countries around the globe.
By giving aid to the Big Three, America will be sending a message to all that a company can prosper regardless of poor results. If that is the case, then what initiative is there to make better products and run a better company? Toyota and Honda seem to be doing relatively well in Tennessee and Kentucky. These companies are great examples of the principle that if your products are good, your company will flourish.
American car manufacturers must go back and revise the way they produce their automobiles to better compete with foreign companies. Bailing them out will only continue the poor production of their cars that will eventually land them in the same predicament.
We cannot and should not bailout the Big Three at this time, for if we do, America might slowly but surely deviate from its core principles of free market capitalism, a situation that is simply unacceptable.
Chris Girgis is a senior majoring in bio medical science.