Utilitarianism & Bailing Out the Big Three

As the world economy continues to stagger about, the American government is considering whether to bail out the big three American automakers (Ford, GM and Chrysler). Like many business, they are running low on cash and are apparently in danger of bankruptcy or outright failure. While this is of great economic and political concern, this discussion also raises philosophic concerns as well.

From a moral standpoint, the question is whether the state should help out the Big Three on moral grounds. As usual, the easiest way to argue for this is to use a utilitarian approach. Making the case is simple enough: estimate the harms done to Americans (or the world if you want to expand the scope of the relevant beings) by not helping out the Big Three and the benefits that will come from helping them out.

The best estimate at this point are that 2 million Americans depend on the Big Three for their health insurance and that 1.4 to 1.7 million jobs would be lost if they failed. While the Big Three make vehicles, they also buy parts, purchase advertising and so on and these tie the companies into the overall American economy. If this figures are accurate, then many people would be harmed if these companies failed. Assuming that the proposed $25 billion (US) bailout would prevent them from failing, then serious harms would presumably be avoided. If the harms prevented are worth at least $25 billion, then a bailout would seem to be the right thing to do.

Of course, there are also other factors to consider. Laying aside the practical concerns about whether the bailout would save the day or not (after all, the Big Three could still fail even with all that extra cash), there is also the obvious concern that the money could be better spent elsewhere. In utilitarian terms, the question is whether there are other ways to use the money that would create greater utility than bailing out the Big Three. In terms of pure numbers, if spending $25 billion elsewhere could help more people, then that is what should probably be done instead. Of course, political spending tends to be decided more by lobbying power than by what would add the most to the general good.

Another concern is to look beyond the more immediate consequences to the long term consequences. After all, the harms generated by bailing out the Big Three must also be considered. One consequence well worth considering is that such a bailout will encourage large companies to engage in more risky behavior. After all, their leadership might reason, if they are “too big or too important to fail”, then Uncle Sam will be there with a bag of cash if they start failing. As such, that anticipated rescue cash will become part of their planning, thus leading them to take more risks. But, even the United States cannot keep dumping taxpayer money into failing companies and this could lead to yet another economic disaster (or a continuation of the existing one).

Moving away from utilitarian concerns, there is also the other moral question: do the Big Three have a moral right to such a bailout? After all, many experts have argued that they are in such dire straits because of leadership failings and poor decision making. If this is true, then it would seem they have no right to expect cash from the state. After all, while the state is supposed to protect the citizens from enemies, the state does not seem to have an obligation to protect citizens from their own bad choices. After all, if I started a business trying to sell books many people did not want to read, then I should hardly expect a check from Uncle Sam when my business fails.

Leave a Comment


NOTE - You can use these HTML tags and attributes:
<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>