President-elect Barack Obama reportedly wants to appoint a high-profile point person to oversee the reform of the ailing auto industry. Submitting to government oversight by a so-called “car Czar” will presumably be part of any auto industry bailout. We understand the urge to couple the bailout with some kind of oversight program. But that doesn’t mean the Car Czar proposal isn’t a terrible idea.
There are many, many reasons we can think of why we shouldn’t have a Car Czar. First of all, these “blankety-blank” czar ideas never solve anything. Starting with the energy czar, and running through the drug czar, the history of czardom is one of failure. (And, if we recall correctly, the whole Czar thing worked out rather badly in Russia also.)
There are also more substantive objections. Here are our top four.
- There’s no one qualified to be the Car Czar. While it can help to bring in an outsider to provide new insights that car industry insiders may habitually overlook, that doesn’t seem to be the problem with Detroit. Ford is run by the former CEO of Boeing. Chrysler is run by Ralph Nardelli, of Home Depot. Bringing in outsiders hasn’t fixed things.
- Politics has no way of finding a qualified person anyway. Even if the saviour of the auto industry was lurking out there somewhere in the small, good place of America, the political process would have no way of identifying him. There simply is no selection mechanism available to politicians to choose the right guy to properly run the auto industry. All the usual constraints on politics–from public perception to bureacratic agency costs to special interest rate seeking–will continue to operate. None of them hold out any promise for getting the right guy into place.
- The right guy would never be allowed to make the right decisions. It’s always possible that the Car Czar saviour candidate would be found by an improbably lucky guess. That still wouldn’t matter because he’d be powerless to do anything to fix the auto industry. In fact, he’d be even more powerless than the current CEOs. They at least have a self-interest in fixing the auto industry and running profitable companies. They’re selected by boards supported by shareholders, who certainly want the auto makers to turn a profit. But the Czar would be selected and controlled by politicians, who serve very different interests. labour politicians will look out for labour interests. Green pols will demand unpopular environmental measures. And so on and so on.
- A Car Czar would lack the tools for making good business decisions. While government planners often like to imagine they can anticipate the demands of consumers, nearly every attempt at grand economic planning on this scale fails. Why? Because the only discovery process for consumer demand a market process.
What’s the solution? It turns out that we actually know exactly what it takes to run a car company profitably. It takes the supervision of the markets: the equity market, the credit market, the labour market and, most importantly, the car buying market. Nothing a Czar will do can trump this. If anything, a Czar would probably just get in the way, making matters worse.
If you want to bail out the auto industry, go ahead an bail it out. But dont go around pretending you have some bureaucratic fix for the industry.
Earlier: Why A Car Czar Won’t Help Anything.