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If you could figure out how to squeeze it into a pithy sound-bite, it could possibly have an effect on policy.
However, I *do* hope that your GOP flacks spread that message far and wide; Michigan, Ohio, Pennsylvania and Indiana might be moved permanently into the Land of Blue.
Also, see: http://obsidianwings.blogs.com/obsidian_wings/2...
Finally! An original and eloquent voice calling down Truth, exposing Megan McArdle as humankind's nemesis. A prophet helping the unwashed among us to see her for the sniveling, insincere, self-enriching, glamor-stealing sycophant that she truly is.
Or not. There's been a revelation, yes, but it's not about McArdle.
But I am curious why you would link to an emotional rant that is obviously suited only for internal consumption among market denialists.
your naive belief in the economic value of massive suffering and the continued deindustialization of our country represents either willful blindness or incredible arrogance.
Those traits, far from being mutually exclusive, frequently tend to go together
He has made an argument. Do you have one?
The "other reason" is that we appear to be headed for a massive recession. Throwing hundreds of thousands of auto company employees, as well as millions of other workers in closely related fields, out of work at this time may not be the best plan.
As for the remaining paragraphs, I have to agree, the piece reads like theology, not economics. Micro-economics as the new Hegelian world-spirit. The triumph of abstract philosophizing over anything even vaguely approaching empiricism.
Maybe it's time to reread your Keynes et. al.? Despite what your microeconomics textbook might tell you, macroeconomics teaches some different lessons. So does history. You can't deduce everything from first principles.
Perhaps I should rephrase: is there an argument for bailing out the Big 3 that doesn't hinge upon the inherent nobility of working in an automobile factory?
If we must choose between bailing out the company or doing nothing, I can understand the argument for postponing the inevitable bankruptcy of Detroit- now might not be the best time for another big firm to go belly-up. But if we are going to postpone the inevitable, how do we ensure that we don't end up in this situation in perpetuity?
Or do we think that all GM needs is the expertise of congress to teach them how to make great cars?
Wilkinson advocates the return of Herbert Spencer's Social Statics.
To paraphrase Oliver Wendall Holmes, this is the espousal of an economic theory that much of the country does not entertain. I would simply note, for good reason.
But note that it is nothing new.
Have you read the Social Statics? It is a masterpiece of liberal social thought. Or do you just throw out the name "Herbert Spencer" as a bugbear? Please read the excellent Stanford Encyclopedia of Philosophy entry on Spencer.
Pure gold!
Besides, writing like Will's does have a productive, valuable purpose - if our politicians read this, they will save us far more of our produce than an assembly-line worker produces.
"Maybe it's time to reread your Keynes et. al.?"
Um, it's never a good time to read Keynes. Maybe you should try Friedman. Unlike Keynes, he has the advantage of being correct.
Will, this post is getting bookmarked. Absolutely perfect. Too bad the "But why can't life be perfect?!?" crowd isn't grown-up enough to see it.
And remember, in the case of China and Egypt - they have hab 6000 years of civilization to perfect their governments.
Plus ça change, plus c'est la même chose.
Second, does any rational individual really think $25B is going to bail the Big 3 out? This just keeps things humming until the credit markets free up again. Sure, we are probably in a recession, and the next time there is a recession, they will need to be bailed out again, etc., etc,.
Put the companies into reorg., let the union's membership decide if their jobs are worth salvaging. Shouldn't it be their decision what wage is fair in light of the current economic conditions.
I lost my business back in AZ when my major customer went chapter 11. Had to relocate and start all over again. Never asked for a penny from my friends or gov't. Why should I be asked to save someone's job when they will not even try to save it themselves.
Reward success, punish failure and make sure the playing field is level. Everything else works itself out over time.
Someone is watching. Not just watching, but caring.
Perhaps more to the point, everybody *wants* someone to be watching them, and to care about their life. If they don't believe in God, or don't believe He cares, then they turn to government.
Uh, there are more major automakers making cars in the US than there were 10, 20 or 30 years ago.
The country may or may not be deindustrializing, but US-made cars with "Toyota" nameplates displacing US-made cars with "Oldsmobile" nameplates is not an indication of said deindustrialization.
Sure, a well-to-do white kid...
Yeah, there's no argument with the Race Card. And reason can't stand up to the moral superiority of being lower middle class...
Well, Chapter 11 doesn't mean GM shutting down. So chances are most of the factories would keep building GM cars for GM. But if GM really did go into liquidation, I really doubt that any other automakers will be buying up GM factories or product lines. There's a lot of over-capacity in the industry, and the Japanese and European automakers have very intentionally avoided setting up production facilities in Michigan to stay away from the UAW. I suspect that no automakers are going to need any new plants at all for a few years, and when Toyota and Honda do find they could use another plant, there'll be plenty of open space and tax breaks to be had in Tennessee, Kentucky, Alabama, etc. Volkswagen recently went through the process of selecting a site for a North American plant. Did they reclaim one of the many shuttered existing auto plants? Of course they didn't -- they choose to build a new one in Chattanooga.
Bailing out banks is fine, because we still use them to squeeze other countries; can't really do that with Chevys, so they don't deserve cash. Got it, Will.
The reality is that the world's biggest automaker VW comes from that wacky country, Germany. You know, high-wage, high-benefit, completely unionized. . .Germany. Their auto industry is gangbusters. And despite all these unions and high salaries, Germany is a manufacturing powerhouse.
You guys absolutely have to address the German car industry in your critique, it seems to me.
Also, a great argument for intervention would not be a bail-out, but for the government - since the market cap is now relatively low - just to buy the damn automaker, loan the stock to the UAW to run as an employee-owned company, and have the UAW either pay off the cost of the loan over 20 years; or at least pay dividends to the taxpayer until the economy turns around and then have them pay off the stock loan.
I mean peeps, let's get creative but stay rational, ok? And stop with the insults on WW, that's not discourse.
The Germans do well despite a heavily unionized workforce. I don't really know if it is as featherbedded and inefficient as some but maybe it is.
Babe Ruth was a big, big drinker, a heavy smoker and perhaps the greatest baseball player of all time. (Certainly one of the greatest.)
The route to athletic excellence does not lie in alcohol and tobacco use. The Babe had some big advantages that allowed him to cover up his weaknesses.
The Germans have strengths that overcome their weaknesses.
There is no contradiction between saying the UAW is a problem for the US car industry and the success of the Germans.
I very much doubt that we can emulate the Germans hook-line-and-sinker. Germany is Germany. It has an entirely different set of economic institutions, economic culture, demographics, eductation system, tax structure, geography, corporate laws, etc. I am surprised that anyone would need this point elucidated.
Similarly, I could not emulate Babe Ruth's success by taking up all his habits. I would simply be a fat, untalented, wanna-be baseball player with lung problems and a wife in divorce court.
Further I would not want to fully emulate Germay, even if we could. Perhaps the German car industry is currently more successful that the US car industry. So what? That success comes at a price and it might not be a price worth paying. Indeed, I would not want to pay it.
Personally, I've been to Germany and I don't want to live there. Do you? (If you are not living in Germany, I guess that the answer is no.)
Everyone benefits from the mistakes and successes of other people. Millions of Americans have benefitted from the genius and initiative of Henry Ford and Bill Gates.
Doesn't really matter if I am comfortable with it, it is unavoidable. Either the UAW pays or we all do. They are certainly more responsible for the success or failure of the Big 3 than I am. Should I be taxed to featherbed them for another 60 years?
Nice job running the company into the ground.
http://en.wikipedia.org/wiki/Polartec
Even though it would hurt my income, the best thing to happen to Chrysler/Ford/GM would be bankruptcy reorganization from which they'd emerge with labor costs at parity to the non-Detroit brands.
Unless, of course, your beached whale of an industry systematically helps Democrats obtain elected office. Then the liberal illuminati come running, because, well - they owe you one.
How is it that a bailout for the big three isn't seen as a huge favor to a colossally well-armed lobbying group?
I agree with Will. Cushion the blow, but the Big 3 and the UAW have to join the real world, and it looks like only bankruptcy will make that happen.
Got It!
Also, my credentials: grew up poor, first gen to college. Hope that qualifies me to comment.
Also been to a German factory (non-auto, but highly union). Workers were most professional, and cared about their product and their company. Can't say I have seen that in a big 3 plant.
If management is so bad, let them fail. New managment will come in and get profitable or liquidate. Americans still make good cars. But now they are called toyotas, hondas, mercedes, and BMWs.
As for who picks up the health care tab... we taxpayers either way.
- Quality (initial and long-term): Ford=1 (passenger equal Toyota; trucks not so good), GM=2 (mixed among brands), Chrysler=99
- Ownership: Ford & GM = Public; Chrysler = Private
- Cash for operations: GM = 3 months; Ford = 9 months?; Chrysler = ?
All three have hourly rates ~ $75 and average > 20 hours per vehicle in labor, while the foreigners in the US average < $50. (In hours Ford is lowest and close to Toyota’s 17 hours per vehicle.)
Left alone GM will tank first, with someone rationalizing brands and product eventually.
In the meantime Ford may then decide to screw CAFE and build whatever it can sell and import stars from its foreign factories while it gets concessions from the UAW.
Chrysler is screwed. Someone may buy Jeep, but God help them and the wealthy investors who sought to make a bundle.
This is right and just.
What does this even mean?
I can't believe we are going to have the bailout argument over and over again. Maybe bailout proponents can give us a list of companies they consider too big too fail, before they fail, just so we know how far this bailout ideology is supposed to go? I mean, if no major company is considered small enough to fail, that sort of says all there needs to be said about killing capitalism, doesn't it? Put a fork in it, it's done.
Is it all or none? Do we give all three whatever it takes? Is it “fair” to give Chrysler, a company with little realistic product in the pipeline, as much as we might give GM with its Volt? Arguably Chrysler’s owners have much less invested than GM’s or Ford’s shareholders do. And what about Ford’s preferred stockholders? Should they retain their voting advantage?
Is it possible that potential investors are holding back to see what transpires? Is there another Kirk Kerkorian waiting in the wings?
To hell with them. Much better to suffer $200 billion in damage to our economy than to sacrifice six weeks of Iraq War spending to save the upper Midwest from total collapse. And anyway, Adam Smith and his magic laissez-fairies will save us, amirite?
It is amazing how the labor theory of value persists after all this time.
Mike: Perhaps not all or none, certainly not just a blank check, but I fail to see how letting the companies die in the next year will produce anything other than economic pain on a scale few of us can imagine.
I also love the "retrain the workers" option. Can someone please tell me which industries are in desperate need of millions of workers? America doesn't make a whole lot of anything these days. There are only so many spots for more consultants and burger flippers.
Candlemakers.
I think Will spelled out very well how far-seeing sympathy is better than short-sighted sympathy. But, lots of people won't accept it.
It's interesting how many people accept dynamism in either personal/cultural areas or economic areas, but not both.
It's also why Detroit doesn't have the cash to invest in new model development for cars that American consumers want to buy...and it's only going to get worse, as the UAW now has more retired than active members for the first time. As for "far-seeing sympathy", the UAW seems more interested in prolonging feather-bedded contracts and work rules than in providing opportunity for the next generation of UAW members.
If Washington really wants to save Detroit, why doesn't it waive CAFE mandates for Detroit, so they can build and sell those vehicles they can at a profit? Detroit has effectively ceded the small-car segment to the Japanese and Koreans, anyway, who will continue to produce (in the US even) and sell small cars profitably regardless of regulatory favoritism shown Detroit.
As for Canada, GM's been there since the '50s - GM makes Chevrolets there. On the wine front, try the Inniskillin. So alas Robert, you're mistaken on all counts.
I repeat my question: why cannot we take this opportunity and give ourselves a German-style world-class auto industry? I await a serious reply.
"Here I admit to being way over my head; I’m neither an economist nor even a blogger, but I’ll press on".
Commendable. Not knowing in public is a big step forward, but as Robin Hanson would say, while it's something, it isn't much. Of course none of us know, that is why we have the discussion.
"Does the world need all of these car companies?"
Consumers will decide, yes? But it seems there is much pent-up demand for cars in rising economies, such as India.
"Don’t we now have a problem of overproduction?"
Doesn't seem like it - it seems like the problem is not overproduction per se, but production of the wrong thing. We need smaller, efficient, green cars, that's what consumers appear to calling for.
"Is this a good industry to invest your money and your future in?"
With such low market caps, actually, it appears that a plan to sell 'em to the UAW would cost less than either bankruptcy or bailout to the taxpayer.
"Do you still have that Yankee know-how to combat Germany, Japan, and just wait, China in car production?"
Oh yeah. "Yes we can."
"Is this a battle you can win? The British have lost"
The British tried hard, but they didn't try smart. You saw that with Rover.
" Then, who would build this German-type company? Not your current management class, it would seem. So who, the government?"
Definitely not the government. I hate to keep repeating myself, so I'll stop, but it's time to pull the rope sideways. Let the UAW own it, and make them hire Germans to manage it. Let the Germans build a German-style industry with employee ownership.
To be fair, instead of efficiently building cars that people liked and wanted to buy, Britain in the 60s and 70s tried bail-outs and state-ownership and state-sponsored mergers of failing car companies, culminating in the fantastic British Leyland, supported by the taxpayer rather than customers. On the other hand, foreign car companies did manage to create an environment in Britain (eg, Japanese car companies in Sunderland) where quite reasonable cars could be made and turn a profit. "Intelligent" policy makers in Washington might be well-advised to check historical examples abroad carefully before jumping into action. It took a long time before the British Government was finally free of Leyland (and other failing industries).
But, no bankruptcy, no fixes, and we'll be back giving them another bailout in five or so years.
contract that removes all of the healthcare and other post
employment benefits from their balance sheets and into a trust
(called a VEBA, or voluntary employee beneficiary association) that is
managed by the UAW.
2) Every auto analyst declared at that time that GM, F and C, with the VEBA, reached labor cost parity with Japanese, German and Korean automakers. The WSJ, et al described the UAW's agreement to the VEBA as a fundamental change in US labor relations. Low interest loans to US OEMs would not be a UAW bailout...the current contract has already solved this problem.
3) Also at that time, GM's share price was in the 20's: Deutsche Bank (the same firm that last Monday set a $0 target price on GM's stock) set a target price of $48 and praised GM's management for devising a method to get out of providing healthcare/pension benefits for hundreds of thousands of retirees and current employees.
This price target of $48 was set less than one year ago.
4) What happened? in 2007, about 16.5 million vehicles were sold in
North America. In 2008, the number will be about 11 million. Every automaker is experiencing 25%+ decreases in units sold. This drop in demand is close to unprecedented, i.e., the credit crunch is hitting "main street." The claim that "GM and F should make cars that people want to buy" is disingenuous.
Don't believe me? Believe this guy: "This environment is more severe than anything we have ever experienced," said Mitsuo Kinoshita, Toyota's executive vice-president, who added that profits were likely to remain at depressed levels next year as a result of weak US demand. "Honestly, it is difficult to foresee when it will bottom out."
Educational standards have declined in the U.S since immigration policies changed
in 1965 to favor third world countries.
Since then the U.S has gone from ranking about 2 to ranking about 23.
The U.S originally limited immigration only from northern europe.
Those are the people who created all the inventions and industries that made the U.S what it was before it started it's decline in 1965.
Most PC's are probably made in China.
I was working on DEC servers 10 years ago and I'm almost certain
they had a sticker that said "Assembled in China" on them.
Of course the reason for this struggling is that we live in a consumer driven society in which consumption is king. Buy more than you can afford, you can have it all, keep the masses poor through the encouragement of consumption. It all harkens back to George Oewell's "Brave New World".
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