“In the United States alone, U.S. automakers directly employ about 355,000 workers, and another 4.5 million Americans work in sectors that are supported by the auto industry. Auto manufacturers are the largest purchasers of U.S. manufactured steel, aluminum, iron, copper, plastics, rubber, electronics and computer chips. Hundreds of automotive suppliers in all 50 states rely on U.S. automakers for their core business. Last year, the auto industry purchased $156 billion from U.S. auto parts suppliers. This industry is vital to millions of citizens in our states and across the country.”– Jennifer Granholm
Would all those jobs vanish off the face of the earth if the big three went under? Would consumers instantaneously demand less cars? Absolutely not! Another automotive manufacturer would need to fill in for the decrease in supply of automobiles. Foreign automotive manufacturers currently employ United States auto workers and would continue to do so if the big three went under. There would be an abundance of unemployed automotive labor in the United States, which one of the many foreign manufacturers would surely utilize.
Let’s suppose the worst happens and all these jobs vanish entirely. In the short run, the economic impact would be catastrophic. We would have a large spike in unemployment, as individuals reallocate resources in the economy. In the long run, however, would be much better off? We would be better off because we would be eliminating entities that do not create wealth. The big three currently combines raw materials, labor, and capital in such a way that the outcome is a good that is valued less then the sum of it parts. Growing such a business model hinders economic growth. I’ll illustrate this point with a simple example:
Suppose I directly employ 5 million people in the process of making encyclopedias. Before I know it, this new technology emerges called the Internet. This new technology delivers infinitely more information that is dynamically updates at a much lower costs. Over the next couple years, my sales begin to decline. I start laying people off, and cutting back on production. My company begins to show losses. But wait! I have numerous suppliers across the country, with business models that depend almost entirely on my encyclopedia production. Should the government bail me out?
Why not? The United States Government seems to have a fancy for investing in failing entities. In fact, Jennifer Granholm, has made a new friend who can save the American automotive industry. “The bottom line is (Obama) is committed to this industry surviving and thriving,” Granholm told the Free Press in Lansing, Mich. “It is a great statement of confidence in his belief in the industry and it’s importance, not just to Michigan but to the rest of the country.” — Jennifer Granholm