As we know, crisis can mean opportunity. And sometimes crisis leaves so much broken that it’s the once in a generation or a century opportunity to build stuff from the ground up rather than tinkering on the margins and making incremental change.
Over the weekend I was discussing the question of whether or not we should be bailing out the auto industry. One issue that has come up over the weekend is that we may be wrong to assume that bankruptcy just means conventional Chapter 11 reorganization (which in the abstract at least could be a good thing) rather than liquidation. In the current economic climate and with the credit markets still out of whack, bankruptcy might actually lead directly to liquidation. That probably means at least a million jobs eliminated at in one fell swoop — something I don’t think we can allow in the current situation.
One other point behind the effects on individual families’ lives and the macro-effects on the economy, I think there are real national security implications to losing the domestic auto industry because you lose a substantial amount of your heavy manufacturing base. Maybe I’ve just got my head stuck in the 20th century on this front; but I don’t think so.
A friend points me to this website: it’s Tesla Motors. They have a car that is 100% electric, goes 244 miles per charge and goes from 0 – 60 in 3.9 seconds. Now, I know electric car market is very complicated on both the technology and business fronts. A lot of TPM Readers know a lot about it; and I know very little. I’m sure this Tesla car costs a gazillion dollars. And maybe Tesla’s crap. And some other manufacturer is the one that’s on the right track. (I’m sure I’ll hear from a lot of you soon on this. And that’s great; I want to know.) But that’s not the point. Some people are really far ahead working out the technology. And I’m curious to hear who that is.
But the point is that we’ve got the hood up and maybe the engine out on the national economy. That’s a bad situation on a lot of fronts. But it’s also the opportunity to really change things. Not just fix things on the margins but make the big changes. As long as we’re talking about sums of money in the tens and hundreds of billions of dollars, let’s not restrict ourselves to considering whether we throw Detroit a lifeline that keeps them in motion and employing their workers through the current recession. Maybe we need to invest 50 billion dollars in having a mass market fully electric car in five years. I don’t see anybody who doesn’t agree that whatever the costs of letting GM go under, that it’s management who drove this company into the ditch with a lot of terrible decisions and unwillingness to change. So maybe we take GM into some sort of managed restructuring, push out management, clean out the equity holders, and use the ‘company’ as the vehicle for leapfrogging the US into the 21st century, non-hydrocarbon auto industry.
As you can see, there are a lot of details I don’t have a handle on. And I’m going to be trying to come up to speed. But one thing I’m confident about is that the real danger we face is being too timid, not too bold. We’re going to spend a ton of money — whether it’s to bailout the auto industry, keep the Great Lakes states on life support for ten years or putting in place some top to bottom program to get us to where we actually need to be. The money, for those who have eyes to see it, are essentially sunk costs at this point. The danger is that we spend all the money and come out the other end still with a big region of the country tied to a dying industry, no true progress on the energy/climate crisis front and a lot more debt.