The 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