December 5, 2008
A Hidden Problem in the Economic Crisis: State Protectionism
On of the jobs of the drafters of the Constitution was to stop state protectionism in the Articles of Confederation. States wanted to put tariffs on all goods coming across their borders from other states. The drafters knew that this was economic chaos. State protectionism has never left us. It is just more subtle. States have many, many forms of legislation that favor state industry and producers. State anti-takeover legislation, state protection for local franchises, state protection for local workers, and the list goes on and on. Now state protection for local automobile dealers is in the way of the restructuring of the American automobile industry. The Big Three need to close down dealers and the state legislation makes it very, very expensive to do so. Another example of state protectionism hurting the general welfare.
December 5, 2008 | Permalink
TrackBack URL for this entry:
Listed below are links to weblogs that reference A Hidden Problem in the Economic Crisis: State Protectionism:
First, no one doubts that as an abstract proposition that State's can pass laws that interfere with economic growth and prosperity.
However, I am not aware of any credible study that shows or tends to show that the current dealership laws hurt the Big 3 car makers.
To the contrary, a first time reader of Charlie Munger's business case for Coca Cola will understand that the problem may actually be a lack of dealerships, which results in both a lack of social proof for the value of the vehicle and loss of the marketing power of convenience for service and repairs.
To the extent that one is making arguments based upon statements by management from the Big 3, isn't it about time that we start showing a much more healthy disregard for people who have such a demonstrated record of a lack of judgment?
Posted by: John Davidson | Dec 13, 2008 9:34:51 AM