Against the bailout: ‘An old man dies, a little girl lives; fair trade’
NYT columnist Roger Cohen had a great analysis of the Detroit bailout this week. Although President Bush did approve a $17 billion bailout on Friday, it is useful to look at Cohen’s points, since this is surely not the last time we will have to contemplate bailing out the Big Three.
Cohen’s op-ed, “Pan Am Dies, America Lives,” which reminds us of the classic line from Sin City, argues that the strength of the American system is derived from the natural rise and fall of companies. He uses the death of Pan Am, once a terrific airline, as an example:
“[F]acts are facts. Pan Am, which had been a leading U.S. international airline since the 1930s, collapsed in 1991. Like other great U.S. companies, it died in the marketplace because it blundered. Churn – of people and businesses – has always defined America. Nobody subsidized U.S. Steel or the automaker Packard in the belief that the world without them was unthinkable.”
Cohen then compares this American survival of the fittest model to that of Europe:
“Coming to the United States from Europe, I found this constant reinvention bracing. Look at the top 40 companies by market capitalization in Europe and most have been there for decades. Not in the United States, land of Google and eBay. Churn requires death as well as birth. The artificial preservation of the inert dampens the quest for the new.”
However, as Cohen notes, over the past few months we have greatly deviated from this philosophy:
“Let’s face it, the American International Group has no right to be around, if risk, markets, transparency, accountability and other foundations of American capitalism mean anything.
“The whole financial crisis is about the death of responsibility: the buck stopped nowhere. Everyone profited from toxic paper. Bernard Madoff, he of the alleged multibillion-dollar Ponzi scheme, is only the latest example.
Cohen then concludes:
“Irresponsibility has also characterized Detroit. I don’t see how you restore responsibility with a bailout.
“The risk of saving the moribund is the demise of the vital – and the long-term cost of that is incalculable.”
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