Below The Beltway

So says Nobel Prize winning economist Paul Krugman:

STOCKHOLM, Sweden – Nobel economics prize winner Paul Krugman said Sunday that the beleaguered U.S. auto industry will likely disappear.

“It will do so because of the geographical forces that me and my colleagues have discussed,” the Princeton University professor and New York Times columnist told reporters in Stockholm. “It is no longer sustained by the current economy.”

(…)

Speaking to reporters three days ahead of the Nobel Prize ceremony, Krugman said plans by U.S. lawmakers to bail out the Big Three automakers were a short-term solution, resulting from a “lack of willingness to accept the failure of a large industry in the midst of an economic crisis.”

In the long run, Krugman is most probably correct. Both because of their own internal structures, which remain rooted in the illusion that the automobile market of the 1960s can somehow be resurrected, and because of the rise of foreign auto companies that can rely upon far cheaper labor than Detroit ever could, the long-term prospects of an industry built around the idea of a wholly “American” automobile cannot survive.

We already have Toyota, Honda, Nissan, Hyuandi, and Kia.

Before long, American’s will be introduced to car companies like Tata from India and SAIC Motor Corp. and Guangzhou Automobile Group Co. from China. Yes, they will likely follow the Japanese model and build factories in the United States because of the cost of transporting fleets of automobiles across the Pacific, but they’ll still be building less expensive cars, and Detroit has never been able to compete with that.

One or more of the Big Three may survive as well, but it will be an a far different form than we know them today, and they won’t be as centralized in Detroit and the Midwest as they are today.

The point is that we are talking about trying to rescue an industry that is in long-term decline and which has shown no signs of having the ability to compete in the 21st Century. That sounds like a sucker’s bet to me.

H/T: James Joyner