I've been watching for months trying to find a dumber approach to a bailout than TARP and now I've found one: France.
The French government said yesterday that it will inject as much as €6 billion ($7.86 billion) into its ailing auto industry. But there's a catch. Prime Minister François Fillon says that (subscription required) "There is no question of the state helping a car manufacturer that decides purely and simply to close one or more production sites in France."
That's right. Any company that closes an unproductive plant won't get any of that government cheese. Any economics professor will tell you that's an incredibly stupid policy. The point of a bailout -- if there is one -- is to buy time for an industry to revitalize itself. Insisting that companies continue to build cars when there are no buyers for them is just bad policy. It's all in the name of preserving jobs but it would be better to free up people who are building stuff no one wants so they can devote their time to something productive. With fewer new cars being sold, demand for mechanics and automotive technicians seems likely to stay strong and possibly rise. Wouldn't it be better to let the factories close and let the market redeploy the workers there?
It's just bad economics, but it has a nice populist ring to it that makes it politically expedient.
France comes up with an even dumber auto industry bailout
Posted Jan 21st 2009 2:15PM by Zac Bissonnette
Filed under: Bad News
Before the Bell: Futures Slightly Higher Ahead of Fed
Disney's 'Alice' Successfully Defends Top Spot
AIG to Pay Out $46 Million to Those Responsible for Its Demise
