A (rightfully) dying breed

Are three million jobs and $300 billion in business trade worth saving?

Well, no, actually – not to the tune of $34 billion in taxpayer cash. That’s how much the CEOs of the Big Three auto companies are currently on their knees unabashedly begging for in Washington.

Alan Mulally, CEO of Ford, even gave up his private jet and drove the 525 miles from Detroit to Washington to plead his case for coin. Of course, by ‘drove’ I mean ‘had someone drive him,’ but still.

Despite their clear desperation, no amount of executive groveling will change the fact that in 2007, GM alone lost $38 billion.

While, yes, Detroit going under will be a substantial hit to an already weak economy, that is no excuse to throw billions of dollars at an industry that has been floundering for some time now and refusing – or at least not attempting – to make necessary changes in order to remain competitive in a global market.

The Big Three have trailed their foreign competitors for decades and still lack the innovation and efficiency necessary to contend with international brands. They have failed to cut costs. They have failed to respond to market demands for fuel efficiency and smaller vehicles. And they have allowed themselves to be manhandled by the UAW (GM has paid out $103 billion in health care costs and pensions for retirees over the past 15 years.)

Handing a check over to the Big Three will merely delay the inevitable: GM is currently burning through $2 billion a month and Chrysler disposed of $3 billion last quarter alone.

Although a glance at the headlines during the last few weeks might suggest otherwise, we do still have a capitalist system – believe it or not. The beauty of that system is that when firms become outdated and uncompetitive, the invisible hand swoops in and disposes of them so that new, better and more productive entities can come in to take their place.

Every day, companies fail. Every day, better companies replace them. Ah, nothing quite like survival of the fittest.

The death of Detroit will be painful, no doubt. But then again, everyone seems to be forgetting that Detroit was moribund long before the term “subprime mortgage” gave you nightmares. James Poniewozik remarked, “In Michigan, the death of the auto industry has been going on so long, it’s become a way of life.”

Paul Krugman, who recently won a Nobel prize for his work on international trade patterns, pointed out that the U.S. auto industry is “no longer sustained by the current economy” and notes the industry will probably disappear, mainly due to geographical forces.

America is no longer the place to build cars. Just as our economy painfully morphed from an agricultural system dependent on a nation of farmers to an industrial one during the Great Depression, it is time for us to move on once again, this time away from industry and into technology.

Step back, Congress; let the invisible hand work its magic.