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If you watched the debate you are aware that the bailout of the American automobile industry is seen as a badge of honor, a sign of economic rectitude, evidence of leadership and so on. Ignore the fact that pointing to the “success” of the auto-bailouts is akin to celebrating the rock-tossing boy in Bastiat’s famous essay, there is something else going on here that bugs me.

I suspect that some folks are at least vaguely familiar with the Broken Window Fallacy, but nonetheless think that saving the auto industry was still good economics because it prevented (they claim) some death spiral of unemployment, or at least prevented particular regions from being hard hit even if overall there are no net negative effects of the bankruptcy.

But what if instead of GM and Chrysler struggling, that the many businesses incorporated under Koch Industries were in the same situation? Suppose that the Koch Brothers had managed those firms into stagnation – making pension promises to their tens of thousands of workers that they could not keep, producing consumer products that consumers were less than enamored with, and also that an “unpredictable and unfortunate decrease in demand” imposed a shock on them that they never could have planned for … would you support the bailout of Koch Industries?

Would you?

After all, Koch Industries constitutes a larger share of the US economy than the US auto companies. They surely employ more people, they surely contribute more to the local communities that they operate in, and they surely have as many (if not more) interconnected businesses both above and below them in the supply chain that would suffer dearly if Koch Industries had systemic problems.

Would you support bailing ’em out in times of need? Remember that the executives of Koch Industries are running a private business, but imagine that they were publicly traded (like, say, Exxon for whom this post equally applies). The conventional wisdom is that if you let Koch fail, it will devastate the US economy, put unnecessary pain and suffering in the laps of hundreds of thousands of workers and hundreds of communities – we would plunge into the Great Depression all over again.

Except it’s the Koch brothers we are talking about.

Now this is not meant to suggest that if the Kochs were failing that I’d support bailing them out, quite the contrary (and I am SURE the Kochs would concur with me). But this is intended to have you ask on what grounds your support for the auto bailouts really exists? If it is on purely economic grounds, heck even if it is on some moral ground, is it plausible that you can support the auto bailouts and not the bailout of the Kochs or any other “evil right-wing” corporation that may be out there? I don’t think so.

So yet again we have here a case of “policy is not about policy.” We like the American car industry. So we come up with an ex-post justification for bailing it out. That justification itself is fallacious, as we have pointed out in nearly a dozen prior posts here, but not only is it fallacious, it is completely inconsistent – which of course is not surprising. And no, just saying, “sure I’d bail out the Kochs” really isn’t enough to convince me that you would – words are costless. I’d like to see someone with influence make a speech pronouncing that loan guarantees and other support would be available to ALL COMERS should the crisis arise in the future. Don’t hold your breath.

3 Responses to “Bail Out Koch Industries”

  1. Speedmaster says:

    GREAT point and post!

  2. Harry says:

    If keeping the wolf from the door by throwing it a caribou steak postpones the wolf problem, then I guess GM was bailed out. Of course, a lot of creditors did not make it safely into the cabin, and winter has not yet arrived.

  3. blah says:

    they get bailouts. they get subsidies. they get billions of dollars in govt contracts. the whole libertarian nonsense is just a scam to convince idiots to cut their taxes, raise them on poor people and funnel wealth to the wealthy.

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