In all the publicity around the $700 billion bailout for wall Street that became law last Friday, the fact that Congress last Tuesday also appropriated $25 billion to prop up ailing US-based carmakers passed almost unnoticed in the US.
But it was not unnoticed overseas. (A hat-tip, indeed, goes to Frank al-Irlandi, who drew this to our attention earlier today.)
Of course, this bailout considerably distorts the global “free market” in cars– not that any such thing ever actually existed. Non-US carmakers, including those who operate production lines within the US, are reportedly furious. The FT reported on Saturday that German car-makers are already lobbying to be allowed access to these funds.
The FT reporters there note that European and Asian banks were successful in their efforts to gain access to the federal bailout loans being made available to the US-based (but often foreign owned or foreign funded) banks.
Regarding access to the car industry loans, they write:
- While the aid package does not specifically exclude foreign carmakers, one European executive said it was “clearly a bail-out” of the Detroit-based industry.
The loans would help carmakers modernise their plants to build more environmentally friendly vehicles. They are available only to plants that are more than 20 years old, excluding all but a handful of foreign-owned facilities.
Stefan Jacoby, the US head of Volkswagen, said lobbying had already started, with Tennessee and Virginia – the two states where the German carmaker has a US presence – also taking part.
The Department of Energy has yet to flesh out the legislation with detailed regulations in a process that will take at least six and maybe as long as 18 months.
I wrote last night that as the current crisis continues we have to guard against “any signs of surging economic nationalism, nationalist greed, jingoism, or a desire for the supposed solaces of a ‘cleansing’ act of war.”
Obviously in these tough times there will be some significant degree of economic nationalism, as we have already seen. Indeed, the WTO in its current form may well be one of the major casualties of the crisis as it evolves. However, I still believe that the crisis can be dealt with and overcome by the world’s nations in ways other than war. To the three reasons for relative optimism that I listed yesterday I would certainly add the fact that today, 63 years after 1945, all the world’s major nations have long experience of working together in a rules-based system that addresses issues in the economic, political, and security arenas.
Also, after all the experience of warfare the world has had since 1939– from Hiroshima to Iraq– no responsible leader could realistically today think that going to war will “solve” any actual problems.
We are not in the 1930s. Reason, calm, and a sense of fairness can prevail.
But it depends on us all having informed and fair-minded publics, as well as wise leaders…