ClimateGate news

Tuesday, December 16, 2008

Alarmism

Alarmism has long been a favourite method of the global warming climate change crowd. It has been used with great success to get the public to take notice of their message of human induced planetary warming. It's a lesson that has not been lost on others.

A whopping 582,000 direct and indirect jobs would be lost in Canada over the next five years if the ailing Big Three US auto makers shut down their Ontario operations, said a study Tuesday.
The above report prepared for the Ontario Manufacturing Council has been at the top of the news today. But it's just another example of alarmism being used in an attempt to motivate government to act in a way it might not otherwise. In this case, the goal is to motivate government to spend billions of taxpayer dollars to "bail out" a failing segment of the automotive industry.

One does not need to be an economist to question the conclusions of this report. Let me explain.

First, we need to ask if it is even remotely likely that the "Big Three" automakers would completely shut down and lay off all of their employees? Of course not. And if you think that's a real possibility, I have some swampland in Florida that might interest you.

No, what the "Big Three" are facing is bankruptcy not total shut down. Bankruptcy is not the end of the world in business. In fact, some might argue that it's a new beginning. Bankruptcy is a process designed to assist failing companies by giving them protection from creditors while they re-organize and restructure their business, reduce their financial losses and hopefully emerge as a company that is leaner, meaner, competitive and profitable. A complete shutdown of operations is not the intent nor even a reasonable expectation of bankruptcy.

Second, with regard to a "bail out" we need to ask the questions, "would it do any good?" and "how much is enough?". The answer to the former is "no". A bailout that does not also include a restructuring will never be large enough. So the answer to the latter is there is no amount sufficient to keeping an inefficient company afloat. They'll be back for more and more and more. And then some more.

I am left wondering at the foolishness of all these proposed bailouts. It is not the government's role to provide for all of our needs. It is not the government's role to rescue every failing business. Have we become so hooked on the nanny state that we believe the government can solve all our problems?

Government cannot solve these problems and that is why it should not waste billions of our dollars investing in losing businesses. Yes, the economy is a mess. Yes, this is going to be painful. Very, very painful. But we will get through this quicker if uncompetitive businesses like the "Big Three" are made to accept their fates and get on with what they must do.

But bailout mania seems to have taken hold across the land. The only difference between the outgoing (Republican) President and the incoming (Democrat) President appears to be which has the plan to dish out the most cash the fastest.

It's all good money after bad. What infuriates me is that it's our money they're rushing to flush down the toilet. Which leads to one last question. Who will bail out the government when it fails?

Whether the goal is to control the climate (an obvious impossibility) or to control the economy (equally impossible) the alarmists' solution is always the same: massive government intervention in our free economy. But after all of our industries have been regulated and nationalized, there won't be any free economy to worry about.

And that's alarming.

1 comment:

Halfwise said...

The market can always absorb some number of cars made somewhere at some price. Right now the number that can be absorbed is low and the market is saying that prices need to drop. But how does a company, and its unions, lower prices when so much money is to be spent on things like pensions and corporate debt that add no value to current vehicles?

The simplest way is to lower prices regardless, and have the government pay the pension obligations and the interest on the corporate bonds.

What does this solve? Nothing at all. But it keeps the doors open for a while so that out of work ex GM employees don't show up en masse to protest at any inauguration ceremonies of incoming messiahs.

The market, and the taxpayers that comprise it, would be better off if auto facilities and the unionized workforce no longer operated under their current agreements and obligations, and instead returned to something that could compete. But this lesson will not have a chance to be learned.