So, let me first state that I’m totally ignorant about the intricacies of the economy, and these government bailouts. Lots of people seem to have pretty strong opinions about them here, and everywhere else, many of whom don’t know the complexities of economics anywhere near well enough for their opinion to have any real merit, myself included. So I can’t really say I have an opinion about them either way. Ok, that said-
I’ve been thinking lately especially about the auto industry bailout, and the more I think, the more I wonder- why would it be better for the gvt. to give the industry say, 100 billion dollars than for the government to instead buy 100 billion dollars worth of cars (Maybe 10 millions cars) which it could then give to, lets say the first 10 million citizens who fulfill some sort of community volunteer program, or hell,even just a lottery- every household gets one ticket, and ultimately a 1 in 12 shot to win a car. It seems this way, the industry still gets the money, but instead of just a shot in the arm, they actually earn it by exchanging their product for it. American citizens are happy, jobs are saved and created due to the necessary increase in production.
If the government is going to give the money anyway, would it not be better to do it in a way like this that seems to create the most amount of winners overall?
Well, for one thing, giving away 10 million cars would severely depress new and used car prices- it’d be a handy short-term fix for the company they chose to buy the cars from, but a short and long-term problem for competitors (and probably a long term problem for the “winning” manufacturer(s) too).
Much better idea to give the money to consumers, if you’re going to give it away. You can always include a caveat like, “may not be spent on a foreign car” or something.
But if they get the bailout money they can put it right where it’s needed. If they sell $100 billion worth of cars, then they’re “out” those many cars. Instead they can get the bailout money PLUS still have $100 billion worth of cars left to sell.
Also, what cars would they buy? Would the auto makers be able to have a significant amount of markup to make money off the cars the government wants (no doubt they want them at a reduced rate)? At a time where we’re trying to reduce emissions and the number of cars on the road, is it a good idea to buy cars? How many Smart Cars do you get for $100 billion? Can people that can’t afford to buy a car afford the taxes/registration fees/upkeep?
I think the problem is that it doesn’t really address the fundamental issues with the automotive industry - that they suck at making cars. Buy X number of cars to artificially keep them afloat selling the same crappy cars that no one else wants to buy doesn’t make sense.
What the bailout money should be going towards is financing the carmakers so they can restructure and retool their manufacturing processes so they can design and build better cars and operate as a more efficient organization.
Relative to any other economy vehicle, I mean. $12k is significantly more than Smarts sell for in Europe, taking into account VAT and such things. You could buy more than 8,333,333 bigger, faster, better equipped Hyundai Accents for just under $10k.