Comments on: French Car Wreck http://baselinescenario.com/2008/12/30/french-car-wreck/ What happened to the global economy and what we can do about it Sat, 26 May 2012 23:20:02 +0000 hourly 1 http://wordpress.com/ By: Kong Jie http://baselinescenario.com/2008/12/30/french-car-wreck/#comment-2334 Wed, 31 Dec 2008 01:56:03 +0000 http://baselinescenario.com/?p=1775#comment-2334 Considering how money is fungible, I can’t see the fundamental difference between what the French are proposing versus what the US government did for GM and Chrysler. Money is flowing from the government to specific companies and not others. Whether loans, subsidies or rebates, the companies will use it to try to get ahead of their competitors (or survive in the face of said competition). If there’s tit-for-tat protectionism, it won’t be the French who started it.

In this climate, everyone will argue that this or that company is critical to the particular industry, which in turn is critical to the economy of the country. Unless there are some really unambiguous and easy-to-use metrics for determining what is protectionist and what isn’t, I doubt any global committee will be able to declare within a reasonable timeframe that country X’s policy Y is protectionist. Especially a major country with a voice on said committee. And a major country will just brush aside the label and carry on anyway, if domestic pressure is sufficient.

The only way I see to prevent an uncoordinated response would require two or three big powers to pledge not to make any bailout move without each other’s approval. Difficult to achieve politically.

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