Paul Krugman: US Auto Industry Is Going To Disappear
New York Times columnist and Nobel-winning economist Paul Krugman suggests that the US auto industry may disappear, and that the bailout is merely a short term fix.
STOCKHOLM, Sweden (AP) — Nobel economics prize winner Paul Krugman said Sunday that the beleaguered U.S. auto industry will likely disappear.
“It will do so because of the geographical forces that me and my colleagues have discussed,” the Princeton University professor and New York Times columnist told reporters in Stockholm. “It is no longer sustained by the current economy.”
Krugman won the 10 million kronor (US$1.4 million) Nobel Memorial Prize in economics for his work on international trade patterns. Some of his research on economic geography seeks to explain why production resources are concentrated in certain locations.
Speaking to reporters three days ahead of the Nobel Prize ceremony, Krugman said plans by U.S. lawmakers to bail out the Big Three automakers were a short-term solution, resulting from a “lack of willingness to accept the failure of a large industry in the midst of an economic crisis.”
Facing massive job losses, the White House and congressional Democrats are negotiating a deal to provide about $15 billion in loans to prevent the weakened U.S. auto industry from collapsing.
Krugman is undoubtedly right that the bailout is merely a short-term fix. In order to survive the American auto industry is going to need to change. A bailout is only going to prop up the status quo, in all its over-regulated and burdened-by-stupid-labor-contracts glory.
But I don’t think the American auto industry necessarily has to succumb to foreign competitors. There are things we could to do revitalize it, and revitalize American manufacturing in general.
We could make labor laws a lot less draconian, for one thing. The auto industry, and American manufacturing in general, has for too long been burdened by ridiculous labor contracts that unnecessarily inflate the price of labor and require things such as nearly full pay for workers who aren’t actually, you know, working. We could also lower taxes. America, collectively, has the second highest corporate tax rate in the world. Lowering that tax burden would go a long way toward encouraging companies to stay in America, and encouraging new companies to move in.
Unfortunately, Democrats are far too fond of big tax revenues from big taxes and they are too beholden to Big Labor to every enact policies that make as much sense as those do.
