Bailouts: When is enough going to be enough?

So much has been written about the bailout packages governments around the globe are offering to failing businesses. Already we have seen billions upon billions of dollars offered to failed or failing businesses in the financial sector and the auto sector. More recently, we've heard calls for massive aid to airlines, broadcasters and even notoriously underperforming telecommunications companies.

I have spent a fair amount of time discussing this issue with friends and followers in social media land. Here is a snapshot of the perspectives I've heard:

"I keep saying this to anyone who will listen - it's not fun, but they call it a market CORRECTION for a reason. If we use the public coffers to artificially sustain what's clearly NOT working, it's just throwing good money after bad. I'd like to take Smith's invisible hand and smack some folks with it ... starting with the CAW, then maybe move to Queen's Park next." - Tracy in Ottawa

"Let's all not hold our breath about this scheme [Chrysler bailout] working." - Joe in Ottawa

"It's not about saving GM - it's about saving "x" number of employees, "x" being larger than most of the companies we all work for, although no-one is noticing that "x" is still a miniscule fraction of Canada's population.

Nor are most people noticing that the "x" employees have enjoyed very high wages "y" for many years of assembly line labour that would have been done almost for free by robots (like at Honda), had "x" employees' union not demurred because robots don't pay dues.

By the way, "x" is just 12,500, and "y" is $34/hour, nearly four times Ontario's minimum wage for what must surely be considered minimum-wage work.

It's instructive to compare "y" at $34/hour with the average annual income in Zambia of $380/YEAR... one decent overtime shift in Oshawa. GM hasn't thought about having cars assembled in Zambia, partly because of NAFTA tariff barriers, but mostly out of fear of the union representing those "x" Canadian workers and their US counterparts." - Norm in Ottawa

There are plenty of understandable reasons for engaging in this sort of economic life support strategy - most significantly, because if the US does it, every other nation will need to as well in order to keep a foothold in that industry. Not to play the game would be a fast route to seeing entire industries pack up and leave a nation, or so the argument goes.

My question: where does it end? If we continue to apply this sort of life support strategy for our failing industries, what criteria will we use to determine when enough is enough? Why is Chrysler and Air Canada more deserving of our financial support than Nortel or Abitibi? I fear we have initiated a slippery slope which may preserve a quality of life for a relative few for the shortest of periods, at the expense of longer term, broader prosperity built upon a renewed, sustainable, competitive and innovative industrial foundation.

What do you think?

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