A Case Study In How To Save The USA Economy

I advocate deregulation for saving the USA economy.  Now the that government has announced the taxpayers will lose even more on the auto industry bailout.  Here is the justification:

"In 2009, the government initially forecast it would lose $44 billion on its auto industry bailout. It revised it down to $30 billion, and later to as low as $13.9 billion earlier this year.The administration and President Barack Obama have argued that any losses on the auto bailout were worth the hundreds of thousands of jobs saved."
From The Detroit News: http://detnews.com/article/20111114/AUTO01/111140434/U.S.-boosts-estimate-of-auto-bailout-losses-to-$23.6B#ixzz1dtSke9ax

But those much heralded reductions have proven to be, like most government claims, nonsense. There is an alternative degenerate bailouts, and an excellent example of how USA could turn the economy around.

Big Auto enjoys massive support in regulation and subsidy.

1. You cannot buy a car in USA from the factory, you must buy it from a dealer.  This allows the industry to control the market.

2. Government auto regulations require unnecessary features that add huge cost to a car.  The features are patented, so their prices are too high as well as mandatory.

3. The government has regulations on what a car can burn.  To support the Iowa corn growers, cars must burn ethanol mix, which causes cars to degrade quicker than usual.  This means cars will not last as long, so we need to buy cars more often.  This is an indirect subsidy to the auto industry, and means no one can recommend "no ethanol" in their cars and compete with Detroit on that basis.

4. The USA auto industry pools patents and you cannot make a car without the permission of the USA auto industry, because you will necessarily violate patents, especially on the nonsensical required safety features.  If you play the game and try to license the patents, you will find that the more you sell the more your competitors make.

5. Ally Bank is GMAC now that the government took it over, bailed out GMAC can continue to lose money financing cars.  A start-up will enjoy no such subsidy.

6. Workers ought to be free to unionize, but USA Labor Relations rules reward management that agrees to unsustainable conditions, with a guarantee that big auto would be bailed out. Today the pensions are guaranteed by ownership of a failing company.  Labor laws only require people meet and confer, not meet and agree.  Nonetheless, Big Auto agreed to impossible-to-sustain benefits because they know they would never be responsible for them.  

So what to do?

The programs would be -

1. Scrap the dealership rules.  Anyone can sell anything they make wherever they want.

2. Insurance companies decide what they want to see in a car, not government regulators.  Let buyers consult insurance companies on which car is best.   If the insurance companies know that airbags make things worse, or first responders hesitate around electric cars, then let the buyers know that and not be obliged to buy expensive and pointless safety or deleterious efficiency features.

3. Dump all regulations on what a car burns.  Right now the auto industry simply meets govt standards, and quits trying. Private industry will come up ever better more efficient power plants, because when there are no regulations, industry exceeds them in competition with each other.  Along these lines, let the courts return to the rule of law and property rights.  Let litigants sue auto makers for violating the "bundle of rights" that come with land ownership under common law.  Watch auto pollution disappear.

4. Eliminating patents in USA is desperately needed, but is not going to happen.  Happily for the auto industry, there is an excellent case for open sourcing all auto patents. The USA taxpayers own all auto companies in USA.  (Don't believe it? Withdraw government support of any company that disputes it.) Since we own the auto companies, we can agree to open source the patents.  Then people can make cars for what they cost, not what they have to pay over to billionaire welfare queens in Grosse Pointe.

5.  Liquidate Ally Bank.  In a free market those cars will get so cheap people will pay cash or put it on a credit card, like we do with computers, which is a relatively deregulated market. An iPhone today has more computer power than NASA had when it put a man on the moon, and it can do far more.  So it would happen with automobiles.

6. Unions are private associations and government should have no part in their activities.   There is no such thing as an outrageous union demand, only outrageous management concessions.    People say, "there are unions, therefore there are problems."  In fact, "there are problems, therefore there are unions."  Well managed companies are not unionized, because the treat workers fair.  The best place in the world to make autos right now is Detroit.  There is no place on earth with so much talent and skill concentrated from auto design down to factory assembly.

I've seen what freedom can achieve in Hong Kong.  I've been in the factories of our competitors around the world.  I am an importer by profession.  We, the USA, can beat anyone anywhere, in any field, if we are free to do so.  We are not, and that is not going to change.

There is no way that USA could ever act on this opportunity.  What might work is for USA to create a Hong Kong in the Detroit metro area.  One Nation, Two Systems.  In a free market, all of that talent would re-associate into the most awesome automakers in the world.  We've seen it before, but we cannot do it with our present system.  We need an alternative:  Freedom From, Freedom To.

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