From the Editors at National Review Online:
That $700 billion rescue package for the banks is in danger of turning from a safety net into a slush fund. The scent of money has attracted lobbyists for every interest group in Washington. Now comes word that Treasury secretary Henry Paulson might dip into the fund to bail out struggling automakers GM and Chrysler. If car companies can qualify for a piece of that $700 billion, then there are no theoretical constraints on its use.
GM has many expenses, so one could imagine why they feel motivated to get a piece of the bailout. How else will they pay their lobbyists and car show models?
Of course GM also employs thousands of American workers, but those folks should consider the consequences of their employer becoming a ward of the state. It will save their jobs in the short term, but unless GM fixes the fundamental problems with its business model (not making cars people want to buy) then a bailout will just delay the inevitable and saddle American taxpayers with more debt.
More broadly, we can’t let American capitalism, the engine of our growth and the growth of economies around the world, be corrupted into a hybrid form of socialism. We can’t allow companies to reap all the benefits of profit without taking the lumps that come with failure—capitalism for the gains, but socialism for the losses. Sometimes businesses, even really big ones, need to go out of business to allow for renewal and sustainable business growth.
The brilliance of capitalism is that it recognizes that economies change. Technologies makes some products obsolete and superior managed companies can drive mismanaged firms out of business. It’s a lot like evolution. Bad business practices, just like ill-adapted creatures, simply go away. Their bad practices are eliminated from the system, making us all richer in the process. Bailouts simply keep those bad practices around.
For more on GM and its request for a handout, read the rest of the piece at NRO.