My question to the masses is this:
Why, or why not, should governments be involved in the protection and support of essential industries. To provide an example, the airlines. They are very important to US commerce and such, and yet they’re in deep economic trouble. Should the government save them, or should survival of the fittest be the rule?
Because the US economy is not a total free market, nor will it ever be. While it may be possible to wean business off of the government trough (hypothetically speaking, because it will never happen), one runs into a massive economic shift if the government were to turn off the spigot all at once.
Using your example, if the government issued a statement tomorrow it would not provide any assistance to ailing airlines, how many would tank in their stocks that day, how many would declare bankruptcy by the weekend, and how many would lose their jobs in the next month? The disruption to the entire economy would not be linear, nor additive, as much as it would multiply and ripple across all sectors.
The airlines are seriously tied to the entire travel and leisure industry. Watch your cruise lines and theme parks layoff workers by the thousands. With that, add in hotels, motels, rental car companies, restaurants, etc. As much as one might believe the economy is diversified enough to handle an economic shift of this scale, in many ways it cannot. While we talk about diversity in the economy, we forget the consolidation of industry areas also creates choke points. Squeeze a choke point and seemingly unrelated business areas start huring almost immediately.
The airline industry as a whole is a choke point. Major businesses and government have long-term contracts many airlines. Take out just a few major carriers and it will take time for the economy to readjust to other carriers. The problem is the economy may not have the time to readjust. Look at what SARS has done to the travel industry in gateway cities such as San Francisco and Los Angeles? Take a look at the routing maps for United and American. Now allow the collapse (not just bankruptcy) of either/or or both of those carriers. How fast will the industry readjust? How fast will the greater economy readjust? Now add in a sluggish economy, where in March the economic firgures were not great. Add in rising first-time unemployment figures, too.
I don’t mean to talk doom/gloom but it’s a fallacy to think the US economy really is a “free” market system. Some areas are more free than other areas. If you want to return to the textbook free market economy, one must wean off industry upon industry from regulations and dependence. Doing it at the drop of a hat invites disaster.
But it won’t happen. There is too much vested interest.
I think you’re begging the question; you’re saying that the gov’t. should be involved in essential industries because the gov’t. is involved in essential industries.
No.
The American psyche is geared to instant gratification. To remove government intervention with an attitude of instant gratification invites disaster.
At the same time, there is too much vested interest in the first place to even attempt it.
The OP is asking “why should the gov’t. be involved,” not “why, given the current realities of America’s form of mixed-market economy, should the gov’t. continue to stay involved.” Isn’t it.
I believe I tried to answer that with my first post. However, my clarification seems to have muddied the waters.
In any case,
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Government should be involved in the regulation of essential industries. The level of involvement will probably change depending upon the industry.
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The US economy is no where near a “free market” economy.
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If the desire is to remove government regulation, it should be done in a deliberate, gradual process, probably occurring over a matter of years so as wean the economy away from regulations (within each specific industry) to a more “free” market system.
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The American psyche is geared to instant gratification. To remove government intervention with an attitude of instant gratification invites disaster.
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There is too much vested interest in the first place to even attempt to remove government regulation on the scale of a totally “free” market economy.
Clear as mud? 
Chicken broth.
I’m not disagreeing with what you’re saying. I read the OP as asking a question in the abstract, in which case the current situation & culture really doesn’t matter. You’re reading it in the specific; i.e. the real-world government making or not making a real-world policy change.
As for clarification…
I was asking an abstract question grounded in real-world cases, which means…both. All responses welcome! Please! Don’t worry!
But to facilitate debate, say the airlines all went under completely tomorrow. Do we let them fail, have a vacuum for a littlw while until startups and reincarnates appear, or prop up the ones we have now, although they may be inefficient and…bad. Is less pain spread out long term worse, or a short half-year or so w/ a great deal of pain so to speak bad?
It’s just one example.
Do you ever see those bumper stickers that say, “No farms, No food”? They seem to be in response to those who oppose heavy farm subsidies. But we aren’t at risk of having no farms, just fewer, and if we had fewer then they wouldn’t need as many subsidies.
I don’t think that the industry can go under. There’s too much of a market for air travel. If the gov’t. withdrew financial support, then some airlines may go under, but there still would be an industry, IMO. That would be costly in that as the prices rise and the number of flights are cut back, people will substitute away with automobile travel, which is quite a bit more dangerous.
It seems like: if there are no egregious flaws in the market, then the gov’t. shouldn’t pump money into the industry. I don’t know the motivation. If we suppose that the future of airline travel is either it will begin booming, or it will contract to a small size based on the public’s reaction to 9/11 and the unfolding war and whatever is to come, then investors may wish to eschew the risk and get out of the market. If politicians want to bet on the future boom instead of a future bust, then couldn’t providing financial aid to the industry properly be called “leadership”? That’s what leaders are supposed to do, right?