The specifics of Henry Paulson's economic bailout plan elude me -- and according to yesterday's report that the remaining portion is going to be redistributed, it seems as though the specifics might have eluded Paulson as well. One thing that progressive economists like Robert Reich have agreed upon is that trickle-down bailouts aren't going to prime the pump. However, as distasteful as it may seem, a bailout of an entity like GM or Chrysler -- companies that employ over 3 million Americans -- are a hell of a lot closer to Main Street than the bailout of a lending institution.
What should Washington do when the Motor City begs for oil? The question, it seems, is not "to bail out or not to bail out." The question is how to bailout. And Capitol Hill can use as an example the slickest bailout in western history. It wasn't in 1975, 1932, or even 1779. Think 1215. When the King of England had his royal balls in a vice, and that vice was called Magna Carta. Magna Carta is one of those "if you remember one date from your medieval history class, remember this date" sort of dates, and although it seems overwrought, the document is a keystone in the structure of modern democracy and the rule of law.
What the hell does Magna Carta have to do with Motor City? Here's the answer in the form of a question: how do you get a power-hungry despot like King John to sign a document ensuring that he and all forthcoming kings are subject to the rule of law and the oversight of local principates? All together now:
Money!
In 1215 King John was absolutely, positively flat broke. Due to some terrible military and political decisions, by the beginning of the 13th century John lost some major revenue-rich land to France and was forced to ask his principalities for money. But by now his local lords were fed up with the kinds of taxes John was used to levying, and so in exchange for the added revenue they demanded some oversight of John's actions. See where I'm going with this?
Motown wants money. Without an influx of liquidity, the whole car-building apparatus may fall apart. Dire situation, indeed. And yet this is the same Motor City that has been dragging its feet for over a decade, building gigantic gas guzzlers, as Japanese brands working off exactly the same market research information were scaling down their operations and beginning to try alternative energy sources.
I am personally related to one such market research guru, an automotive expert who has been screaming doom into the ears of domestic manufacturers like some sort of Midwestern Cassandra for the last decade, predicting the doom of the SUV and the primacy of the small, fuel efficient car. And instead of evolving, the Kings of Motor City sat on their thrones, gorging themselves with turkey legs and one-dollar gallons of gas.
Now, Detroit has no money to build cars. Americans have no money to buy cars. Even if they did, the reputation of American brands is only slightly better than that of Chinese baby food. Sure, the collapse of a domestic auto industry would be tragic. But the threat of total collapse makes this the perfect time to put the Invisible Hand down the pants of the Big Three and apply some negotiating pressure.
There should be mandates and timetables for an entirely electric plug in car. There should be mandates and timetables for cellulose-based bio fuel on large machines like trucks and planes that can't yet be powered entirely by electricity. There should be realistic renegotiations with the UAW, negotiations that begin with a good, hard look at the business models of Japanese auto plants in the United States.
Let's not hand the Kings of Motor City a blank check. If we do, they'll just go back to their turkey leg dinners and insane proclamations about American supremacy. But let's hand them a check nonetheless. For the first time since the 19th century, America has in its grasp the tender balls of the Auto Industry. Let's give them a squeeze.
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