Obama’s drive toward auto-industry nationalization

The most troubling part of the auto-industry bailout may not be the actual investment of taxpayer dollars in a failing industry. It may be that this is really tantamount to the nationalization of one of the “commanding heights” of the US economy. David Singer says as much in his article in the New York Times summarizing the bail-out effort. On the one hand, President-elect Obama says: “We don’t want government to run companies. Generally, government historically hasn’t done that very well.” But what is the government doing with the bailout? As Singer writes:

But what Mr. Obama went on to describe was a long-term bailout that would be conditioned on federal oversight. It could mean that the government would mandate, or at least heavily influence, what kind of cars companies make, what mileage and environmental standards they must meet and what large investments they are permitted to make ââ?¬â?? to recreate an industry that Mr. Obama said “actually works, that actually functions.” It all sounds perilously close to a word that no one in Mr. Obama’s camp wants to be caught uttering: nationalization.

Yes, indeed. Singer’s article has plenty of other nuggets, including the contradictions implicit in US trade policy.

And the third risk ââ?¬â?? one barely discussed so far ââ?¬â?? is that in trying to save the nation’s carmakers, the United States is violating at least the spirit of what it has preached around the world for two decades. The United States has demanded that nations treat American companies on their soil the same way they treat their home-grown industries, a concept called “national treatment.” Yet so far, there is no talk of offering aid to Toyota, Honda, BMW or the other foreign automakers that have built factories on American soil, employed American workers and managed to make a profit doing so. “If Japan was doing this, we’d be threatening billions of dollars in retaliation,” said Jeffrey Garten, a professor at the Yale School of Management, who as under secretary of commerce in the 1990s was one of many government officials who tried in vain to get Detroit prepared for a world of international competition. “In fact, when they did something a lot more subtle, we threatened exactly that,” referring to calls for import restrictions.

And this is just the beginning. Mr. Obama hasn’t even been sworn in yet!

Samuel R. Staley, Ph.D. is a senior research fellow at Reason Foundation and managing director of the DeVoe L. Moore Center at Florida State University in Tallahassee where he teaches graduate and undergraduate courses in urban planning, regulation, and urban economics. Prior to joining Florida State, Staley was director of urban growth and land-use policy for Reason Foundation where he helped establish its urban policy program in 1997.