As a strong proponent of the GM bailout I feel obliged to answer Ozimek’s challenge.

I would like to know on what grounds those who wanted a GM bailout would reject a BP bailout. I will aknowledge in advance I believe there are important differences, but do they?

The first and most obvious is that the GM bailout was during a time of amazing uncertainty. I believed at the time and still contend today that there was a serious possibility of Great Depression II and the collapse of a major industrial concern would have increased those risks.

Second, the auto industry is lumpy. GM produces the ultimately differentiated product. The units are highly branded. Their parts are uniquely designed. Indeed, entire factories are fabricated for purpose of producing a specific vehicle and would have to be completely retooled to produce anything else. 

Third, all three US manufacturers were tied together through the supply chain. This not only magnifies the intensity of a collapse but also has unique consequences for labor.  US manufacturers used UAW labor while foreign manufacturers do not. This makes the two imperfect substitutes and would have contributed significantly to a difficult transition.

Now, we can have a long debate over WHY the auto industry is this way. The maze of regulation and standards that means upstart auto companies using interchangeable parts don’t have a serious chance. The auto dealer protection laws that promote mega concerns. The UAW itself. The list goes on.

However, you make policy with the economy you have, not the economy you wish you had. The one we had was one in which GM was a large heavily entwined mega concern that would have taken down much of the domestic industry and paralyzed large swaths of the labor market all during a time of unprecedented uncertainty.

BP on the other hand produces the classic perfectly competitive product. Its completely fungible. Its traded on an exchange. It has a healthy futures market. Its exactly what a textbook economic product should look like. Shortages will be sorted out in the markets, prices will respond and equilibrium will be restored.

Moreover, I don’t know of any particular reason why the small amount of BP labor that there is would be immobilized. The only issues that I for see are

1) What happens to BPs liabilities. Presumably they are simply taken up by the Feds and ultimately the taxpayers. In this case perhaps a “back door bailout” is appropriate, in which BP is forced to make payments over time to the injured parties.

2) What happens to BPs capital. I don’t know how smoothly the capital markets in the oil industry function. Now given that the rig wasn’t even owned by BP but leased I have a hard time imagining that capital doesn’t flow well in the oil industry, but you never know.