Out Of Gas

The Kroog weighed in on the Big Three today, and the results were not pretty.

Nobel economics prize winner Paul Krugman said Sunday that the beleaguered U.S. auto industry will likely disappear.

"It will do so because of the geographical forces that me and my colleagues have discussed," the Princeton University professor and New York Times columnist told reporters in Stockholm. "It is no longer sustained by the current economy."

Krugman won the 10 million kronor (US$1.4 million) Nobel Memorial Prize in economics for his work on international trade patterns. Some of his research on economic geography seeks to explain why production resources are concentrated in certain locations.

Speaking to reporters three days ahead of the Nobel Prize ceremony, Krugman said plans by U.S. lawmakers to bail out the Big Three automakers were a short-term solution, resulting from a "lack of willingness to accept the failure of a large industry in the midst of an economic crisis."

And I happen to agree with him. As I've said, there's nothing that can really be done to solve the US auto industry's problem that doesn't involve the nationalization of the entire industry, which is just unacceptable given there's plenty of car companies out there. Even in the short term if the automakers survive, they simply will die long term as people won't buy cars from a bankrupt company. Obama will be forced to do it, as losing millions of auto jobs is even more unacceptable, and the price autoworkers will have to pay is to deunionize completely and take brunt of the concessions. The GOP will demand it and will get it. The only other option is to lock out foreign autos completely in a bout of nationalist protectionism.

It's not the auto industry that's going to vanish first, it's the unions...and with it the last of the blue-collar middle class in this country.