Is Nationalization The Wave Of The Future For The U.S.?

David Sanger of the New York Times has some interesting thoughts and dares to ask the question that most seem intent on avoiding. Specifically, how close is the U.S. coming to nationalizing industries and how do we square that with our professed support for free markets.

When President-elect Barack Obama talked on Sunday about realigning the American automobile industry he was quick to offer a caution, lest he sound more like the incoming leader of France, or perhaps Japan.

“We don’t want government to run companies,” Mr. Obama told Tom Brokaw on “Meet the Press.” “Generally, government historically hasn’t done that very well.”

But what Mr. Obama went on to describe was a long-term bailout that would be conditioned on federal oversight. It could mean that the government would mandate, or at least heavily influence, what kind of cars companies make, what mileage and environmental standards they must meet and what large investments they are permitted to make — to recreate an industry that Mr. Obama said “actually works, that actually functions.”

It all sounds perilously close to a word that no one in Mr. Obama’s camp wants to be caught uttering: nationalization.

If you look closely at the substance of the draft of the bill that Congress sent to the White House today, it is difficult not to think that if it doesn’t amount to nationalization then it walks perilously close to the line. The provision for a czar who would monitor relatively minute transactions of the loan recipients represents a sea change in the relationship between government and private enterprise. The argument that this represents an out-of-court chapter 11 is a smoke screen. A bankruptcy proceeding has a defined life and terminus, this arrangement is open-ended and once instituted is unlikely to end soon.

More from Sanger on the hypocrisy of the plan:

And the third risk — one barely discussed so far — is that in trying to save the nation’s carmakers, the United States is violating at least the spirit of what it has preached around the world for two decades. The United States has demanded that nations treat American companies on their soil the same way they treat their home-grown industries, a concept called “national treatment.”

Yet so far, there is no talk of offering aid to Toyota, Honda, BMW or the other foreign automakers that have built factories on American soil, employed American workers and managed to make a profit doing so.

“If Japan was doing this, we’d be threatening billions of dollars in retaliation,” said Jeffrey Garten, a professor at the Yale School of Management, who as under secretary of commerce in the 1990s was one of many government officials who tried in vain to get Detroit prepared for a world of international competition. “In fact, when they did something a lot more subtle, we threatened exactly that,” referring to calls for import restrictions.

It may well be that this amounts to nothing more than the semi-nationalization of the Detroit auto industry. Then again, we have already semi-nationalized the financial sector. So who is to say that given a taste of this sort of expansion of power that the political class won’t develop a taste for more. Will the next couple of years result in a fundamental shift in economic philosophy in this country?

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