Hypocrisy, or rationality?


Freddie accuses me, again, of a double standard on Detroit and Wall Street.  I don't know what not wanting to bail out Detroit is supposed to make me want do to Wall Street.  I don't have any ideological interest in saving Wall Street jobs, no matter how devastating that may be for the local economy of my beloved hometown.  I don't think the CEOs, or any of the financial workers, are entitled to a damn thing beyond two weeks' severance.  I don't want to save the banking industry, except insofar as we can't get along without it.

In my judgement--and the judgement of most economists--a massive banking industry failure has the potential to take down the real economy into a Great Depression like death spiral, and the failure of even a large single non-financial industry does not.  I am interested in saving banking only to the extent that this is true, and no more.  It is not a matter of deciding who is most deserving, or cutest, or most historic.  We need a semi-functioning banking industry, for reasons that I've gone into, at this point, about eighty times before.  We do not need an American auto business, and in fact old line industries have collapsed in America before (see Steel, Bethlehem and US) without wreaking the destruction that their CEOs also promised would inevitably follow.

I have a theory of government which says that the government should make these kinds of interventions only where they benefit society as a whole, not when they almost exclusively benefit the interests to whom the money is given.  (I make exceptions for those who are, temporarily or permanently, unable to care for themselves.  But that doesn't describe the autoworkers, except insofar as I think they should get unemployment insurance and relocation help.  And anyway, I digress.)

Now, I may be wrong about my judgement that the collapse of the financial industry will destroy the economy in a way that the collapse of Detroit will not.  But it's not some belief that I just cooked up yesterday to justify giving outrageous amounts of money to my friends on Wall Street while sticking it to the UAW--indeed, a year ago any left-wing development economist could have happily and easily enumerated all the countries where a financial crisis had far, far worse results than, say, the collapse of the national automaker. 

But given that belief, my stance on both bailouts is rational, not hypocritical.  And frankly, I think that anyone who believes that the collapse of even a large national industrial concern is on par with the collapse of a nation's financial system is obligated to provide multiple historical international examples of their theory.  Because I can name dozens to support mine.

Obviously, if you think it's the government's job to pick economic winners and losers, and ensure that rich people lose as often as possible, then my stance is horrible and hypocritical.  I will explain another time why I think that this is neither just, nor in the long-term interests of American society.

For now, Merry Christmas, bankers, autoworkers, and all.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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