Dear Government, Please Don’t “Save” Our Industries

grapes-of-wrath-dvdcover1The current recession combined with bad business decisions have put US automakers on the verge of bankruptcy. Now there are talks of instituting government subsidies to save an industry that is “vital” to American prosperity.

Let me tell you a little story about another industry that used to be “vital” to America.

In 1930 25% of Americans were farmers. The Great Depression hurt farmers (like everyone else) but because farming was such an “important” industry, the American government provided subsidies and other programs like the Agricultural Adjustment Act to help struggling farmers stay afloat.

The Great Depression was not the reason small farmers were losing money. Private farmers were struggling because maintaining a small farm was no longer a viable business model in any market. The government should have gotten out of the way of capitalism and let the market dictate where workers went and what prices were set.

Fast forward to today – 2% of the population lives on farms and 150,000 large farms make up 72% of all US farm sales. Farming is hardly the lifeline of blue-collar America. However, many of the subsidies created during the depression still exist today. From 1996-2002 American taxpayers paid $16 billion per year in subsidies to farmers. In 2004 it was lower – only $8 billion – but still a ridiculous figure that is even more absurd when you learn where this money is actually going.

1930’s farming = 2008 automobile production

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6 Responses to Dear Government, Please Don’t “Save” Our Industries

  1. r8chel says:

    I’m not an economist, but I agree this doesn’t seem like a very good idea…

  2. Joe Cure says:

    Right.

    Another way to look at it is in a free, capitalist economy the profits are (and should be) private (private as in the profits are kept by the individuals and companies who make them).

    If the profits are private, the losses must be private as well (i.e. no government/tax payer bailout).

  3. Anty M. says:

    They have known, we have all known, for at least 5 years (and I’m being conservative) that market was headed towards smaller, effecient cars. They saw it coming but choose not to respond. I don’t understnad that unless it was greed at the top: the old philosphy of “get it while the gettin’s good.” The heart of the problem is the credit crisis. Unfortunately, if the car makers go down so will so many of their supplies and I think 1000s of other businesses., It will be interesting to see what Obama does. I heard a new word coined yesterday, instead of Bureaucracy, they slipped and slipped and said barackeaucracy.

  4. Dan K says:

    This is ridiculous….

  5. David O. says:

    Joe,

    I agree with you on most parts however I tend to believe that in a capitalistic society such as ours, major profit losses private or public, reverberate throughout the market and can cause catastrophic damage to other sectors (as Aunt M alluded to). I think if the proposed action by the government was instead called a low interest loan, or even an investment, then the majority of the American public would support it. I think people to to equate “bailout” with “handout” which this would not be from all accounts. Please correct me if I’m wrong but I understand all the government intervention is designed to plug the hole in the dam so it does not come crashing down.

    But take my opinion with a huge grain of salt. I got a D in both accounting and economics.

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