The great piano industry bailout that wasn't

Jeffrey Tucker at the Mises Institute has a good article comparing the auto industry today to the piano industry of the early twentieth century. (Click here for the article.) You can't bailout companies that are inefficient and incapable of competing. If the auto industry was to go bankrupt the economy would adapt and move forward. And at a much faster and efficient pace not having the burden of the high costs of the current system.

"Today the highest-price good that people buy besides their houses is their car, and this reality leads people to believe that we can't possibly let the American car industry die. We couldn't possibly be a real country and a powerful nation without our beloved auto industry, which is so essential to our national well-being. In any case, this is what spokesmen for the big three say.

What about the time before the car? Look at the years between 1870 and 1930. As surprising as this may sound today, the biggest-ticket item on every household budget besides the house itself was its piano. Everyone had to have one. Those who didn't have one aspired to have one. It was a prize, an essential part of life, and they sold by the millions and millions."

"Let's say that FDR had initiated a bailout of the piano industry and then even taken it over and nationalized it. The same firms would have made the same pianos for decades and decades. But that wouldn't have stopped the Japanese industry from taking off in the 1960s and '70s. Americans would have far preferred them because they would have been cheaper. American pianos, because they would be state owned, would fall in quality, lower and lower to the point that they would become like a Soviet car in the 1960s. Of course you could set up tariff barriers. That would have forced American pianos on us. Except for one thing: demand would still have collapsed. The pianos still have to have a market. But let's say you find a workaround for that problem by requiring everyone to own a piano. You still can't make people play them and value them.

In the end you have to ask, is it really worth trillions in subsidies, vast tariffs, impositions all around, just to keep what you declare to be an essential industry alive? Well, eventually, as we have learned in the case of pianos, this is not essential. Things come and things go. Such is the world. Such is the course of events. Such is the forward motion of history in a world of relentless progress generated by the free market. Thank goodness that FDR didn't bother saving the US piano industry! As a result, Americans can get a huge range of instruments from all countries in the world at any price they are willing to pay."