Friday, August 22, 2008

Next up: The Bail Out of Detriot

I just read that Representative John Dingell of Michigan has proposed a $25 billion federal bail out for the Big 3 auto manufacturers located in his home state. Hard to believe it has come to this. Though not suprising. After the bail out of the airlines in 2001, followed by the bail out of the major wall street invesment banks, home builders and now Freddie and Fannie in 2008, it was bound to happen. In fact, it is hard to make a principled argument against Dingell's proposal based on recent precedent. How do you tell an American auto executive that he is less worthy of charity than the coalition of agribusinesses that benefited so handsomely from this years Farming Bill.

Which makes me wonder: Why didn't the tech industry request federal funds after the dot com and telecom bubbles burst in 2000? In hindsight, it seems like a grave mistake. The tech industry employs a large number of middle class voters. For some reason, there was no cry for help as this important industry shed millions of jobs from 2001 through 2004. Perhaps this is a reflection of the way we in this industry think. We are more open to the good and bad of market forces. Start-ups are risky and routinely fail. We don't expect people to feel sorry for us or to provide us a hand out when poor management or bad luck works against us. What is surprising to me is that I thought this was a strongly held American belief. The last few years have changed my outlook.

The most troubling implication of this recent massive federal intervention is the precedent we have now set for federal hand outs. The bar is quite low. When the next American industry experiences hard times, how do we stand up and say "you got yourselves into this mess, you need to solve the problem yourselves"?

No comments: