The latest group to ask for bailout is the automobile industry. Most of their argument for bailout hinges on the thought that if they fail, they will take the economy with them. They are framing the problem backwards. The real problem is not that they are too big to fail, but that they are too big to succeed. Any time you try to have your company do everything, you risk not being very good or efficient at any of it. What the companies really need is to be more modular. If cars were built like computers, you could choose your own build out of the most appropriate components, knowing that all of them were built by people who specialize, and that replacement parts would be standardized enough to be cheaply available. TechCrunch has a good article about the concept .
What we need is to be lighter on our feet. The days of massive self sufficient manufactueres with big pension plans should be a thing of the past. We need small specialized manufacturers. When they see a need in the market they should specialize in creating the best product at the best price to fill the need. When the need is gone, there shouldn’t be any crying about lost jobs; just restructure, retool, retrain, transfer if neccesary, and get back to work. Benefit packages should be made more easily transferrable. If another nation is seriously subsidizing an industry in order to gain market share, I think we would be better served by putting more international economic pressure on that country, which is stronger the more global the industry is. We should encourage distributed international industry in order to make it unprofitable to cheat. The alternative is a cold war race to socialism.