Nobel economics prize winner Paul Krugman said Sunday that the beleaguered U.S. auto industry will likely disappear.I'd say that's only true if you don't count the foreign-owned auto manufacturing plants in the southern U.S. to be part of the U.S. auto industry. This raises the question: If they employ 113,000 workers, does it really matter if the auto plants are foreign owned?
"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."
Krugman won the 10 million kronor (US$1.4 million) Nobel Memorial Prize in economics for his work on international trade patterns. Some of his research on economic geography seeks to explain why production resources are concentrated in certain locations.
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."
Krugman's comments also raise another question: If the big three automakers are going to go away anyhow, should politicians really be handing them tens of billions of your tax dollars?
Hat tip: Greg Mankiw.
Update: Paul Krugman says his words were misreported. It's the Detroit auto industry that will disappear, not the U.S. auto industry. This makes much more sense.