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InsiderOnline Blog: December 2008

Letting Companies Fail Creates Jobs

Proponents of propping up failing automakers at taxpayer expense so that they can continue to pay out on overly generous union contracts should take note: That policy has been tried before. The British government did it in the late 1970s, when the company British Leyland ran into trouble because it failed to make cars people actually wanted to buy. Despite government “investment” of more than £1.4 billion into the company between 1979 and 1983, British Leyland was eventually broken up and sold off. The government had feared the loss of employment that would result from British Leyland’s collapse, but Iain Murray’s coda to the story suggests that the best employment policy is to let the market find the most profitable use of resources:

Ironically, today the most productive car plant in Europe is in my home town of Sunderland, where 5000 workers build 330,000 Nissan cars a year. There are still around 250,000 people employed in the design and manufacture of vehicles in the UK, more than BL employed in Mrs Thatcher’s time.

SEE ALSO: “Does Detroit Really Need a Bailout? Lessons from Britain,” by Nigel Hawkins, The Heritage Foundation, November 20, 2008.

Posted on 12/17/08 03:50 PM by Alex Adrianson

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