mushinnoshin

A friend of mine recently IM’d me a blog post arguing against the proposed bailout for Detroit — I think it was this one — with a comment to the effect of “this is why I don’t like the Democrats OR Bush”.

I didn’t answer because I wanted to respond more thoughtfully and in depth than I could over IM at the time. Because, sympathetic I am, but neither do I embrace the fatalistic No Bailouts for Anyone Anytime attitude being taken, in earnest by libertarians, and in disingenuous rhetoric by many (especially House) Republicans.

First point, look I think you’d be really hard pressed to make the case that Democrats have been responsible for more corporate welfare over the years than Republicans. I would suspect the opposite, but for now let’s assume it’s a pretty even split. Because I think what we have here is a situation where alliances tend to form diagonally across the Nolan chart, so the issue doesn’t fit neatly into left-right or partisan terms. Somewhat upper-left, economically pragmatic Democrats find themselves working tepidly with lower-right biz-pig mercantilist Republicans in favor, while upper-right libertarian Republicans find themselves in uneasy alliance with lower-left populist Democrats in opposition.

Now, the heart of the libertarian argument against these bailouts has always been that we should let the free market sort things out, that companies go bankrupt because they deserve it, and that we have to let the invisible hand smack ‘em around to get them to work properly.

In the abstract, I think that’s absolutely correct.

But here’s the problem — as I’ve said many times, we don’t have a free market, and we apply free-market principles to the system we have often at our own peril. We have a mercantilist system rooted in statist corporate privilege and a perverted allodial take on capitalism. Together these things result in a degree of centralization and concentration of wealth that could never happen in a truly free market.

In other words, never in a free market would some 3 million jobs of real human beings who have little control over the major decisions of a small handful of corporations hang in the balance while we let the invisible hand do its job.

I’m not necessarily arguing in favor of bailing out the auto industry — I’m no economist, and I don’t have the data to crunch the numbers myself. All I’m saying is that sometimes, such bailouts may be necessary evils.

But in such cases, I want a few things in place to minimize the evil. I want strict control over tight strings to make sure the assistance does what we want it to do. I want caps on executive pay. I want oversight and public input on the direction the corporation should move (for example in the case of the auto industry, the proposed requirements to move towards producing greener cars). And most importantly, I want the beneficiaries of the structural flaws in our system — which, while not necessarily including every wealthy person, does include the vast vast majority of them, and certainly includes the corporations themselves — to pay most of the cost.

And for the job of implementing these conditions, I place infinitely more trust in the upper-left pragmatic Democrats than I do in the lower-right biz-pig Republicans.