Only in America: bailing out car companies
If the UK economy revolves around housing, the pivot of the American economy is the motor car. That’s why the US carmakers can claim a $34bn bail-out is about saving the country rather than rescuing their companies.
The history of America over the past century is the history of the automobile – much more so than it is the history of the airplane. Its success and confidence was reflected in its cars and the state of the industry is a measure of the current recession.
Sure, there is a housing crash in America that triggered the sub-prime mortgage crisis that has brought down some of the biggest banks, not only on Wall Street but also round the world. But cars reflect consumption rather than investment: they record its excesses and, with General Motors’ sales down more than 40 per cent on the year, the squeeze.
Repossessing a man’s home in America is one thing, but repossessing his car is to remove his mobility.
It is because of the importance of the car that the US still has a car industry to save. It is not that demand has always held up but domestic manufacturers have been supported during weak markets so that Ford, GM and Chrysler still struggle on.
The UK allowed its motor industry to strangle itself, selling what was left to overseas producers before allowing foreign car makers to build plants here. Because it is no longer regarded as a British industry, there is no chance of the UK government organizing a bail out as it did for the banks.
The truth is that GM at least is probably bust already and that a government hand-out will merely postpone the day when the money runs out. But now that the chief executives have grounded their private jets and slashed their pay to $1 they will probably receive their state aid because their industry is so iconic.
But rather than give money to loss-making manufacturers simply to stay in business when business is so bad, it would be better to give the public $34bn in vouchers to buy new cars and thus stimulating demand.
