The corporate welfare state we're in

By Alex Singleton | 2 April 2005

The British government is offering a bridging loan to car-maker MG Rover to help it keep trading until it manages to do a tie up with the Shanghai Automotive Industry Corporation, a company owned by the Chinese government. A bridging loan seems eminently reasonable - after all, it's only short-term help. But, as Milton Friedman has pointed out, nothing is as permanent as a temporary government programme. For decades MG Rover has been fleecing the taxpayer. It has a tarnished brand; it has been unable to produce new, exciting models; and its cars are unappealing to consumers. Who supposes, after the Chinese tie-up, that MG Rover won't keep on needing short-term subsidies? We all know that the support the Chinese are thinking on investing is not going to do much to reverse MG Rover's fortunes.

MG Rover's current owners have done nicely out of their ownership. To pay themselves such high salaries, however, while seemingly going cap-in-hand to the government is a bit rich.

If MG Rover cannot sustain itself, the British government would be better off letting it go into receivership. Then the Chinese government would be able to buy it for a realistic price, and the taxpayer would finally - after decades - be able to stop wasting money on providing MG Rover with a corporate welfare state.

In a globalized world, it is no longer realistic to expect each country to have a national car manufacturer. It is in each country's interests to allow specialization internationally. In Britain, various governments have attempted to support the native car industry. But these attempts haven't washed with the public. They buy according to price and quality - and MG Rover's offerings just don't appeal.