Do you really think the government can make better autos

Steven Greenhut:

I recall my kids having a heated argument over some factual matter, and I suggested they simply look up the question at hand. If something's demonstrably true, there's not much point arguing over it. Kids do this all the time, and even adults sometimes argue over ideas that have been debunked.

On the comment section of the Register's Orange Punch blog, for instance, some readers recently debated whether government or the private sector operated in a more consumer-friendly manner. Of course, the nations with government-dominated economies produce the worst products and are least able to meet the demands of consumers. Arguing over this is like arguing with someone who believes that O.J. Simpson is still looking for the real killer.

In a free-market economy – or at least in relatively free economies, given that government regulation is everywhere – individuals are free to start businesses, work for whomever they choose, buy whatever products they prefer. Private investment leads to innovation, as the most efficient businesses are the most profitable. Every business must lure consumers through better quality or lower prices, or else risk going out of business.

It's not a perfect world, but in such a world in general the cream rises to the top. Individuals have the most freedom and prosperity. In government-run operations, there are no consumers. The government produces what its planners choose. Those planners lack the incentive and knowledge – and, indeed, no one has the knowledge to run anything as complex as an economy – to funnel resources in their most efficient manner. Bad agencies rarely change and never go away. The results are bureaucratic operations that run by dictate, not by consumer choice. Resources are squandered and misdirected. There's a reason people still tell jokes about Russians waiting in line for toilet paper in the old Soviet Union.

I feel embarrassed even having to make such obvious points. Yet such arguments must be made these days as the nation is experiencing a bout of mass amnesia. The latest silliness: A plan to provide $15 billion in government bridge loans to bail out the failing Big Three automakers, who have lately been making a spectacle of themselves by heading to Washington, D.C., and threatening the end of civilization if their companies go into bankruptcy. The public here is smarter than the politicians, as polls show overwhelming public disapproval with these shameless raids on the Treasury.

Fortunately, the Senate killed the proposal late last week after the UAW balked at wage concessions, but the Bush administration wanted, as of Friday, to use money from the $700 billion financial bailout for the automotive basket cases. Still, the details of the almost-approved plan are worth thinking about. As The New York Times explained, the plan included "tight government control of the crippled American auto industry, including the possible creation of an oversight board made up of five Cabinet secretaries and the head of the Environmental Protection Agency and led by an independent chairman or 'car czar.'" The plan would have given "the U.S. government a substantial ownership stake in the industry and a central role in its restructuring," according to the Wall Street Journal.

These are ideas of almost comic proportions. Has anyone noticed the state of government-run institutions these days? General Motors, Ford and Chrysler face billions of dollars of debt, but the federal government's debt has topped $10 trillion and is expected to exceed $11 trillion following the financial bailout. The Big Three have a mess because of the "legacy" costs of retiree health care and pensions that spineless corporate leaders granted to the insatiable United Auto Workers, but governments at all levels have imposed many trillions of dollars in unfunded liabilities (debt) on the public because of spineless politicians' promises to public employee unions. Does anyone really think that the government can get anyone's financial house in order?

Imagine car companies controlled by the government. Government is notorious for its customer service – bad service, that is. There's no incentive for the Department of Motor Vehicles, the Internal Revenue Service or the Highway Patrol to treat the public well because they are coercive organizations. You must do as you are told. You cannot shop elsewhere.

Does it surprise you that government office hours are designed around the preferences of the government workers, not the so-called customers? Does it surprise you that government services and products, produced without competition and without a bottom line of profits and losses, are shoddy and expensive? Would anyone really prefer to drive a Trabant (made in the former East Germany) over a Honda? Yet why would the nation choose to put government officials more directly in control of private enterprises?

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I would really hate an auto designed by Thomas Friedman of the NY Times. It would probably be a moped with a rain suit. Yet that is the direction the so called bailout is headed when Democrats take charge next year. The perception that government is smarter than the people who are in the business of making autos is based on an invalid assumption that someone in the government can command people to buy the products they want them to have rather than the ones they want.