Is It 1982 or 1974?
by Scott P. Richert
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Much of the commentary on the current economic crisis has compared 2008 to 1982, the depth of the last major recession. But there are some important differences, chief among them that, despite losses in manufacturing in the early 80’s, the United States still emerged with significant manufacturing capacity. Whatever happens in 2008, that’s not going to be the case: Manufacturing is down to ten percent of the American economy—and still falling.
And that points to another difference: Despite his many failings, Ronald Reagan at least understood that, unless a country makes things, it has no economic independence. That’s why he was willing to act pragmatically, despite his own stated commitment to free-trade ideology.
Those who claim his mantle today, however, are not simply ideologues on free trade; they have become convinced that money can breed money—and, moreover, that it’s a good thing for it to do so. The only kind of manufacturing they want is the manufacturing of ever-higher stock prices.
But there are other reasons to think that 1982 isn’t a proper historical analogy. This just came across the CNN Breaking News wire:
U.S. employers cut 533,000 jobs in November — the most in 34 years — as unemployment rate rose to 6.7 percent.
Let’s see—2008-34 gives us? That’s right: 1974. And despite the brief period of deflation in the last two months, the inflation rate has been hovering between four and five percent this year. High inflation plus high unemployment sounds awfully familiar, even to a mere boy like me. Yes, both are lower than they were in 1974 (or in 1982, for that matter). But the snapshot matters less than the direction, and in 1982, the economy was already beginning to turn the corner.
So, 1974 it is. Unless, of course, it’s 1929.
[Subscribe online to Chronicles: A Magazine of American Culture. Click here for details].
1 Comment by Etienne Gervaise on 5 December 2008:
I got my bachelor’s degree in Production/Operations Management in 1984, while Ron was still Chief Exec. The bulk of graduates from GMU Business School were Finance majors. I was treated with scorn as the louts declared, “Production? That’s not where the economy is going!” I’d reply, “Good luck shuffling worthless paper.” By 1990 Shearson Lehman, as it was called then, had fired most of these genii. So much for where the economy is going.
Does anybody want to buy an empty factory? There are lots of them, and owners will let them go for a song. Furthermore the small towns they’re in will make concessions and give tax breaks to get their people working.
2 Comment by Jeff Anderson on 5 December 2008:
One can have money, but he can’t eat / live in / wear / drive / make repairs with it.
The things we make and live on are valuable as long as they function and are maintained. As long as their contribution to human life is real.
Money is really only valuable when you give it away.
There is a philosophy in there, somewhere.
3 Comment by Tom Piatak on 5 December 2008:
Scott makes some very important points here.
4 Pingback by Manufacturing ever-higher stock prices. « Poststop on 5 December 2008:
[...] Manufacturing ever-higher stock prices. Scott P. Richert in Chronicles [...]
5 Comment by Aaron D. Wolf on 5 December 2008:
Scott’s point about maintaining what’s left of our liberty is important. Mr. Jefferson wanted us to be a country of farmers (best for a republic or, rather, several confederated republics), and for us to obtain our manufacturing goods primarily from England. But he also saw the need for domestic industry. Too much dependence on the mother country, and we would lose our independence.
We can talk about the destructive nature of mechanical Jacobins (while driving to work, school, church, grocery stores, etc., etc. in one), certainly, but the fact is, our entire society has been shaped around the automobile. I’d bet that those cheap foreign-made vehicles the “market is god” folks are celebrating won’t be so cheap if the U.S. automakers go under. That means foreign dominance and a loss of liberty.
It is pie in the sky (or pie in the toilet) to say “I hope the whole damn industry goes under, so we can start over.” Who wants to hand his children that Thunderdome of a society? Pace the sometimes brilliant J.H. Kunstler, I don’t think World Made By Hand is what we’re gonna get.
6 Comment by Bruce on 5 December 2008:
Well if it’s 1929, I need to lose a bit of weight anyway. OK, quite a bit of weight.
Nice new mug shot Mr. Richert.
7 Comment by TJF on 5 December 2008:
If Scott is right–and he must be, because a similar thought occurred to me as I listened to the news this morning–then we might do well to ponder how we got where we were in 1974. In 1974 we were disengaging from the Vietnam War–a sleight of hand managed by that “brilliant” diplomat Henry Kissinger who threw our poor allies to the wolves. From what I can gather, Vietnam cost about $600 billion in 2004 dollars. I believe we have already exceeded that by a good bit, and it will be in the trillions by the time the war has ended and we have paid for it–with interest. Lyndon Baines Johnson, while running a costly war, had refused to curtail his Great Society spending, and following suit our own Lyndon Baines Bush and the Congress have refused to cut back on social spending. Last January Lawrence Lindsey (former White House economist) admitted that he and the other bright boys had underestimated the costs, but
“World War II ultimately cost about 140% of GDP. Would FDR have thought, “Well, the war is worth it at 130% of GDP, but not at 170%”? In terms of the damage it did to the American economy and the American heartland, or simply in terms of the number of dead, the Civil War dwarfed all the others. But Lincoln certainly never took a pencil to do a cost-benefit test. Nor did John F. Kennedy when he said, “We will pay any price, bear any burden … to assure the survival and the success of liberty.” Had any of these leaders done that, they would have fallen into the trap that the economics profession is so often accused of: They would know the price of everything and the value of nothing.”
Yes, and FDR, JFK, LBJ, and GWB do not even appear to know the value of money. You see why economists cannot be trusted to give political advice. Fasten your seat-belts, as Miss Davis advised us, it’s going to be a bumpy night.
8 Comment by D.J. Anderson on 5 December 2008:
You can’t live in a mutual fund and you can’t brush your teeth with a stock option…
9 Comment by Derek Leaberry on 5 December 2008:
How much of James Howard Kuntsler’s vision will come to fruition? Will Bill Kauffman’s beloved localism dominate the 21st Century world?
10 Pingback by Sweeny Report » The value of manufacturing seems to have been forgotten on 5 December 2008:
[...] editor of Chronicles Magazine, published by the Rockford Institute, has an insightful post today on the mag’s website. Comparing this recession to 1982 may not be valid, he says, because back then our manufacturing [...]
11 Comment by J. Meng on 5 December 2008:
In another post I expressed my agreement with Mr. Piatak’s argument for a loan to Detroit. I still agree. I agree, because those persons dependent upon the auto industry, directly or indirectly (millions), need a period to readjust their lifestyles — to get ready for the really harsh days ahead (I say harsh in a relative sense, because most of us have become softened by the “American Way”, which, today, means basically, all forms of self-indulgence). Because the loan is merely a stop-gap and not a panacea, we must prepare for hard times. If you don’t have a hunting rifle, get one. If you don’t know how to fish, learn. If you have an acre of immaculately manicured lawn, dig it up and begin preparing to bend your back and by the sweat of your brow break up the earth with hoe and shovel, if you don’t have or can’t afford a roto-tiller, and then plant and cultivate. Forget who’s going to win the superbowl or March Madness. Those things don’t matter. They are the distractions by which exploiters of consumerism profit. The tsunami of economic destruction is rushing forth to cleanse us like nothing before it. Mr. Richert asks rhetorically is it 1974 or 1929. Its not only 1929, but its 1929 maximized. No man-made insitution or program will be able to stop it. The sin of over-production is over.
It is the season of Advent. We are preparing for the coming of Jesus Christ our Savior (if the ACLU will permit it). In the pre-Vatican II Roman Breviary, a lesson in Matins for Wednesday in the first week of Advent is taken from Chapter three of the Prophet Isaias. It reads: “For behold the sovereign the Lord of hosts shall take away from Jerusalem and from Juda the valiant and the strong, the whole strength of bread, and the whole strength of water; the strong man, and the man of war, the judge and the prophet, and the cunning man, and the ancient, the captain over fifty, and the honorable in countenance, and the counsellor, and the architect, and the skillful in eloquent speech. And I will give children to be their princes; and the effeminate shall rule over them. For Jerusalem is ruined, and Juda is fallen, because their tongue and their devices are against the Lord, to provoke th eye of his majesty. The show of their countenance hath answered them, and they have proclaimed abroad their sin as Sodom, and they have not hid it. Woe to their souls, for evils are rendered to them! Say to the just man that it is well, for he shall eat the fruit of his doings. Woe to the wicked unto evil! for the reward of his hands shall be given him.”
America is tending to its destruction as once did Jerusalem. As a result, it is losing all power, including the power of understanding. America no longer knows where it is going and does not see the abyss into which it is plunging. We are men Moses spoke of in his canticle: “They are a nation without counsel and without wisdom.” Forsaking God for our own illusions has produced this oncoming catastrophe. We have been incompetent stewards of the riches given to us to tend. We have lived with the idea that man is an economic animal and nothing more. We have forgotten that all material goods and services are for the sake of the more important activities of man: the worship of God, love of family, cultivation of the intellect and the fine arts. We have forgotten that we were not made for the earth.
12 Comment by Theodore Van Oosbree on 5 December 2008:
2008 is different from 1982 or 1974 because of the enormous bad debts we have now. Such debts create a credit crisis different in kind (and much worse) than the minor inventory cycle downturns we learn about in Econ 1A (also known as recessions). Throw in fifty years of de-industrialization and you’ve got yourself a “Riesensauerei”, as the Germans would say. The handwriting is indeed on the wall but the Daniels have been ignored.
13 Comment by Miles Gloriosus on 5 December 2008:
@1Etienne Gervaise
I recall sitting at lunch one day in Boston in 1988 and uproariously laughing with several colleagues of mine, many of whom were MIT and Harvard trained scientists, as we read of Michael Dukakis’s claiming how America’s economic future would soon be moving overwhelmingly toward a service economy.
It was already clear to many of us that unless you actually made something, you could not have a first world economy. Or, if shuffling papers created wealth, the Federal government would be the nation’s largest contributor to the GDP.
14 Comment by Ivan on 5 December 2008:
Impoverishing the rest of us (via higher prices on imports) in order to enrich those employed in the automobile manufacturing industry is not only immoral, but unnecessary. Instead of subsidizing the automobile manufacturers, why haven’t those that wish to save them advocated a drastic reduction in labor costs, in order to gain an advantage over the foreign imports? Reduce everyone’s wages by, say, 20%. If you were making $70,000 per year, you will now earn $56,000 per year. What’s the need for any government policies, welfare, and taxes?
15 Comment by Scott P. Richert on 5 December 2008:
Ivan (@12):
Right now, the average autoworker is making $28 per hour. That’s $56,000. Under the new contract with the UAW, signed in 2007, new hires make $14 per hour. A 20-percent reduction in $14 per hour is $11.20–which would qualify most couples (let alone families) for government assistance. Such people are hardly being “enrich[ed].”
I’m not a fan of the New Republic, but Jonathan Cohn did a pretty good job of crunching the numbers and debunking certain myths in “Assembly Line.” One important conclusion that gets lost in the length of the piece:
There may still be (indeed, there are) good arguments against extending loans to the Big Three. The idea that they haven’t made any attempt to control labor costs (wages and benefits) isn’t one of them.
16 Comment by TJF on 5 December 2008:
But is it not fair to say that there are two ways of assessing labor costs, one from the employees’ perspective and another from the employers’. Your analysis of what employees actually receive helps to debunk the myth of the greedy autoworker, but if one factors in all that the automakers are spending on retirees and on laid-off employees, the picture is changed, I believe, and helps to justify the claim that US automakers are at a disadvantage. As for what constitutes a just wage for autoworkers, that is difficult to say. Again, there are two ways of looking at it: What does it take for a man to survive and take care of a wife and child, and, what do people with that level of skill and training normally receive. In decades past, uneducated young men without skills could get jobs in the industry. I know there is a claim being made that the industry wants a new breed of worker with math and technical skills–the community colleges are big on this–but with so much of the work being robotized, one wonders how much truth there is in the claim. I do remember, as a child, when engineers on diesel trains still had to have the fireman on board because of union rules. A safety issue they claimed. My father had been an organizer with the NMU, and I grew up knowing Union men, but my father and other men of his generation became rather skeptical about the overpaid union employees of the 50’s.
Before saying $11-17 per hour is too low a salary, one would have to say, in comparison to what? How much does an assistant manager in a retail operation earn? Is he less qualified than the auto worker? I simply don’t know, but before making moral judgments on this issue, one would have to have a comparative basis, both within the US and including our competitors. If the industry cannot pay enough to feed a man and his family–and, by the way, what on average are their wives earning?–then young men would be ill advised to seek such jobs. It is not as if we are talking about some fine old tradition that undergirds the best aspects of our civilization. These are not farmers or poets or blacksmiths, and I wonder what is it in the auto workers’ way of life that I, personally, am supposed to be subsidizing? I am ready to admit the case, when it comes to small farmers and craftsmen, but assembly line work is hardly an ennobling occupation. Yes, it is more noble than the occupation of a libertarian economist or historian working as a social parasite at a state university or tax-receiving private school, but that is hardly a recommendation.
17 Comment by Scott P. Richert on 5 December 2008:
Of course. That’s one of the reasons why, in July, GM announced that, effective January 1, 2009, they would eliminate health insurance for all salaried retirees over the age of 65. That’s 100,000 people right there that were taken off the rolls, though GM will provide them, in return, $300 per month to purchase supplemental insurance.
The Big Three are transferring the pension funds to the unions come 2010. That’s part of the 2007 contract. That gets them out from under the burden of providing pensions to current retirees.
Right now, a little over three dollars of every four that the Big Three spend on pensions and healthcare goes to retirees. Assuming that the Big Three survive until 2010, that number will be reversed–and the total sum will be much smaller.
18 Comment by Bob Trojan on 5 December 2008:
Although the cost structure is the focus of discussion, I think we must remember that the Big 3 have lost considerable market share here in the U.S. I think a large part has to do with the perceived quality and reliability. Every survey comparing US versus foreign cars that I have seen has given the foreign cars a clear edge on these two factors. US quality, 20 years ago was awful while the foreigners had much higher quality and reliability. And this is a result of the “annual new model” versus the “make it the same each year” design philosophy.
Certainly in the very recent past, US quality, especially Ford’s, has been improving, but the past image is still there.
Couple that with the miles per gallon issue and you have now added other reasons why consumers have given more market share to the foreign transplant auto producers and contributed to the current financial crisis. It’s tough to survive when you are constantly losing market share yet organized for a past higher share.
Yes, a cost difference is there, but quality and reliability, I think are also important buying decision factors. They have to get that right also or at least change the perception.
19 Comment by M.A. Roberts on 5 December 2008:
The more I witness the behavior of many of these globalists on the news, the more I am convinced that many of them have a burning desire to see the American auto industry fall so that it will make the U.S. more dependent upon Asia, binding the U.S. even more to the globalist apparatus.
20 Comment by Scott P. Richert on 5 December 2008:
Bob Trojan (@16):
I agree that changing the perception is necessary—and to be honest, I don’t know how that can be done, short of people buying domestic vehicles and being satisfied with them.
How do you convince someone who buys foreign models exclusively that he’d be just as happy with a domestic one?
I don’t mean this to ignite another round of “The Big Three’s vehicles suck!” and “I’d never buy a rice burner!” Let’s assume perfect equality in quality and prices that match penny-for penny. When someone is happy with his previous $20k purchase, it’s pretty hard (and rightly so) to get him to switch brands. Some other overriding factor has to come into play—like a desire to support his neighbors through his purchase.
21 Comment by Bob Trojan on 5 December 2008:
Scott @18
During these times, a financial incentive may be better than most other ways. Americans love to “get the deal”, “buy on sale”.
Maybe one form of consumer stimulus or bailout should be tied to a big discount on a car made by the Big 3. Or maybe a 5 year free maintenance program.
I remember when the Japanese were breaking into the U.S. market; they offered inventory on consignment; you pay only when you use it, then terms were 90 days that.
22 Comment by Scott P. Richert on 5 December 2008:
To follow up on my own point: To this day, I have family in Southern Indiana who refuse to buy anything other than a Ford. When we drive down there in our Chevy van for our annual family reunion, I know that a good portion of my time will be spent hearing about how only a fool would buy a Chevy.
Never mind that Ford, like GM, like Chrysler, has had its ups and downs. They’re Ford men.
If, after all these years, they can have that kind of devotion to one of the Big Three at the expense of the other two, how can we expect those who have been happy with their foreign cars to be any different?
On the other hand, most of those conversations with my relatives about Ford versus Chevy do end with “Well, at least you didn’t buy a damned foreign car.” But for those who are willing to buy a foreign car, that simply doesn’t enter into the equation.
23 Comment by Scott P. Richert on 5 December 2008:
Bob Trojan (@19):
Both of those might be useful. In fact, I have some vague memory that forms of each were part of the Chrysler bailout. (My memory may well be faulty.)
24 Comment by Steve Berg on 5 December 2008:
Scott @18: Perhaps Apple Computer could buy out one of the car companies?
25 Comment by Scott P. Richert on 5 December 2008:
I’m not finding the evidence to back up my vague memory, though, as part of the Chrysler loan guarantees, the federal government purchased Dodge pickups for military use. And I believe that Chrysler offered better maintenance programs or longer coverage to buyers in the early 80’s, though it may not have been part of the bailout package itself.
26 Comment by Scott P. Richert on 5 December 2008:
Steve Berg (@22):
It is interesting that a number of articles on this crisis have said that the Big Three need their own Steve Jobs. And let’s not forget that the $1 per year salary that Congress is demanding that the CEOs accept was a Jobsian stunt when he took control of Apple again.
There is something to this, and it may be a crucial difference between the Chrysler bailout and today. Lee Iacocca was Chrysler’s Steve Jobs. None of the current CEOs can even pretend to play that role.
Does that mean that they need to find someone who can?
27 Comment by Bob Trojan on 5 December 2008:
Lee Iacocca had tremendous charisma, a fierce loyal following, a “can-do” attitude that made things happen. It’s a shame that at the previous meeting, 2 of the exec’s said their salary “was fine”. It took an embarassment for them to come in and say $1.
Maybe they should bring him back and manage all three into restructuring. Oh, yes, I forgot, I think he owns a winery in Italy, maybe he’d prefer that instead.
But I bet he’d love to be asked!
28 Comment by Daniel Maxwell on 5 December 2008:
I am going to go out on a limb and predict this recession will not be as bad as some of us are claiming. That said, I am glad you looked at the bottom line a bit more Scott. GM, easily the most troubled of the three, has to make massive cuts. What is a just wage ? Being that I myself work close to the auto industry, I would say anywhere from about 12-20 is a just wage for your typical line worker.
Toyota (yes, I know one of those evil foreign car makers) IIRC pays their line workers about 17 an hour. They are of course, not unionized. But I believe about half (?) of all Toyotas sold in the US are also made in the US. So the old adage of the third world worker selling us irresistible, cheap junk doesnt work with many of the Japanese car companies (not to mention Japan hasnt been third world in a long, long time).
“I’d bet that those cheap foreign-made vehicles the “market is god” folks are celebrating won’t be so cheap if the U.S. automakers go under.”
Cheap as in lower priced? Or cheap is in lower quality? Truth be told, I am the only one in my family who drives an American car now. Simply because of the perception (rightly or wrongly) that US made cars are junk, my parents and siblings will not touch anything American now. Those of you with protectionist beliefs need to remember that the American car industry wouldnt be in as bad a place now if they didnt keep making junk for so long while the Japanese and Koreans improved. Now I will grant Scott that Ford has improved (every co-worker of mine who has a truck, its a Ford), but Dodge and GM are seen as lack-luster.
29 Comment by John Willson on 5 December 2008:
The unions are broken (except the teachers and the “public sector” leaches, but that’s another story) and should not be brought into serious economic discussions. The Catholic concept of “family wage” is the only moral issue relating to honest workers. But to jump from reasonable concern for ordinary people to bailing out the auto industry makes little sense. That route just takes us more into the New Deal, which is what American politics and economics has been about since 1933. Let’s turn our attention to repealing NAFTA, stopping foreign wars, and giving incentives to making things. Just as I’m not a bit disturbed about being called an “isolationist,” I’m not in the least worried about being labeled a “protectionist.” Anybody who knows American History knows that we have always been better off being both. At least us ordinary folks.
30 Comment by Leo on 5 December 2008:
What exactly is a “foreign car”? Last time I heard Georgetown,Kentucky was still in the good old USA and so was South Carolina.Don’t like “foreign cars”,take it up with those folks.Detroit’s current competitors are Down South not in Japan.Think Southern Senators like Shelby are opposing the Big 3 for purely ideological reasons?Think again.And another point:the Big 3 themselves moved MUCH OF THEIR PRODUCTION offshore years ago.These companies are laughably not some paragon of the “American Way”.Ford was ecstatic to outsource jobs to Mexico under NAFTA:it is annoying to hear them now play the “patriotic” card.A careful and strict loan to the Big 3 may be desirable…but I find it juvenile,for instance,to declare “foreign cars” unpatriotic.
31 Comment by Scott P. Richert on 5 December 2008:
Leo (@28):
What do you call a car made by a foreign-owned company and containing an average of 35 percent domestically made parts? (Let alone one made with only 5 percent domestic parts.) I don’t actually intend anything particularly pejorative in referring to that car as a “foreign car”; but I do think there is a difference between purchasing a car from a company that is based here and has an average of 75 percent domestic content and a “foreign car.”
As for the other points, read my column in the January issue (which went to press yesterday) or a half-dozen others from the last eight years in Chronicles, in which I’ve specifically criticized those (and other) actions of the Big Three.
32 Comment by Etienne Gervaise on 5 December 2008:
@11 Miles
Politician Dukakis ought to have known better having caused more mills in his state to close on his watch. But the MBAs churned out by Boston diploma mills are also bringing loutishness along with their number-crunching skills. Even a once-gentlemanly industry like construction has become a daily grind of dealing with foul-mouthed, petulant children who could test the patience of Job. It’s getting so bad that old timers like myself have to threaten physical violence to gain respect. Oddly enough, I rarely hear these boffins apologize for their lousy behavior, they merely explain that they’re under pressure to cut costs.
And as for the federal government shuffling papers, from what I’ve witnessed, fully half of them sit at their desk talking on cell phones to their mothers while surfing the internet.
33 Comment by Leo on 5 December 2008:
Scott,there are tens of thousands of autoworkers below the Mason-Dixon line who produce Toyotas,Hondas,Nissans,etc.In my opinion these are American made cars and these are American jobs.The paper used for Chronicles may have come from Canada,but this an American magazine that has given you an American job.As for who owns Toyota,for instance,well…the stockholders do.Toyota is technically foreign owned…sure…and those foreigners include a lot of Americans.I am very impressed with Chronicles and with your writing.My point isn’t to so much to criticize as to mobilize.This is not 1929 and is only 1974 if Obama makes it so.This is about hysteria more than anything else.Look at the Citigroup silliness.This bank did not need money and did not ask for money.This bank was not even close …NOT EVEN CLOSE to insolvency.If the market -on hysteria-wanted to push the price down to 25 cents a share….good,a real chance for young people to buy stock.As it is ,the Treasury butted in anyway and evil speculators like me bought it the Friday before.Sometimes I hate the government too…but that doesn’t stop me from playing it.Why would one want to die a hopeless deadbeat like Jefferson?Go make money paleos!!!Because I have a personal rule that I only leave two posts,I sign off with only good intentions and nothing further to say here.
34 Comment by Mr. Stonehouse on 5 December 2008:
The news another 500,000 people lost their jobs last month, bringing the total for the year to two million, makes me sick to my stomach.
On the news this evening I heard if the Big Three go down, expect another three million without work. Add to that the tens of thousands that have already lost their jobs in December.
Also on the news this morning–record foreclosures and record numbers behind on their mortgages.
With all the coming layoffs, we appear to be in a vicious cycle which will lead to more foreclosures and more job losses and on and on.
We’re on the edge, looking into the abyss.
I keep a photo in my desk drawer of my mother, three-years-old, dressed in her flour sack dress, playing in the sand where the soil used to be on the farm in Saskatchewan where she grew up. It serves as a reminder of where we came from.
My grandfather used to tell us that in the early 1930s he served as the undertaker for the small community of East End where the farm was. He buried 16 kids one winter who starved or froze to death because their new immigrant eastern European parents were to proud to ask for help.
I give credit to the auto industry for asking for help. This wealth redistribution goes against my ideology, but the alternative is disaster
35 Comment by bob trojan on 5 December 2008:
Scott @ 29
“What do you call a car made by a foreign-owned company and containing an average of 35 percent domestically made parts? (Let alone one made with only 5 percent domestic parts.) I don’t actually intend anything particularly pejorative in referring to that car as a “foreign car”; but I do think there is a difference between purchasing a car from a company that is based here and has an average of 75 percent domestic content and a “foreign car.””
Scott; many of the foreign cars made here now have 70+% of US content. They do it with American labor. Hyundai opened a $1 bil. new facility 2 years ago, Volkswagon announced a similar investment in the south. That’s where many of them are located. Why? It’s “Right to Work” laws.
I still think it gets to quality, reliability and then price.
36 Comment by Tom Piatak on 5 December 2008:
Mr. Trojan,
Yes, you are right that some foreign cars made here have high domestic content, but all the foreign car companies still import large numbers of cars into the United States from abroad, thereby lowering the average domestic content of the vehicles they sell here to the figure Mr. Richert cites.
–Tom
37 Comment by G.L.A. on 5 December 2008:
Back to the original topic:
Theodore Van Oosbree writes at #10:
“2008 is different from 1982 or 1974 because of the enormous bad debts we have now. Such debts create a credit crisis different in kind (and much worse) than the minor inventory cycle downturns we learn about in Econ 1A (also known as recessions)”
That is an important point, when comparing the past and present, in the structural difference that has taken place in the US
over the last quarter of a century.
Another major difference, that weakens a comparison with the past, is the extent of globalization. Not only is much of this enormous debt globalized, but the thinking of the managerial elite has become globalized. both in Washington and in the corporate board rooms. What you hear publicly from the politicians and the CEO’s sounds as if they are thinking like Americans from 1974, but the model they are working from in private is a global model.
There is not an American politician or major corporate manager who intends to reverse NAFTA or the reliance on Asian manufacturing or foreign capital/debt purchasing. Today, when one asks the question, who owns America?, the answer is, a handful of globalists.
38 Comment by John Seiler on 5 December 2008:
A couple of comments, if you’ll bear with me, in this and 2 more posts.
Yes, 1974 is a better analogy than 1982. The reason: a bad, long, expensive war and wild domestic spending lured the country off the gold standard both times. In 1971, Nixon officially took us off gold, which then rose from $35 an ounce to $800. The depression hit hard in 1974. At least at that time there were no bailouts of failed companies.
1982 actually was a recession only because Reagan delayed most of his 1981 tax cuts to 1983, so companies waited to save money. 1983 was a boom year.
From 1981-2001 (or maybe 1997 or 2003, depending on how you calculate it), there was a quasi-gold standard of about $350 an ounce, begun by Reagan and Volcker. Too bad it wasn’t made official. After Bush-Greenspan took us off the quasi-standard, gold soared to $1,000 an ounce, although it’s currently (evening of Dec. 5, 2008) $751.
Going off the gold standard both times caused immediate rises in oil and gasoline prices because all commodities are tied to gold’s price. Both times, the Detroit automakers were hit hard by the commodity inflation as people fled their “gas guzzlers” in the 1970s and their SUVs in the 2000s for smaller cars built more often by foreign companies.
Reagan’s protectionism was limited and either irrelevant or backfired. The motorcycle protectionism allowed tiny Harley-Davidson to survive so we still have paunchy midde-aged guys riding their “hogs” and thinking they’re Brando in “The Wild One” while blowing out our ears.
The 1980s quotas on Japanese car imports backfired. As Peter Drucker pointed out – I think in the audio cassette lectures to “The New Realities” book, although I can’t find the tapes anymore – the Nipponese used the quotas as an excuse to offshore much of their production to America. They told their unions and politicians, “The Americans are making us do this, we have no choice.” Drucker said that, when labor costs drop below 15%, as had happened to the Japanese by the 1980s, and to the Detroit companies later, then shipping equals the same, or less than, labor, so it makes sense to offshore production.
Drucker added that the Reagan protectionism also allowed the Japanese to raise prices. They then poured the money into solving their major engineering defect: transmissions. That’s why their transmissions are so good nowadays.
The Reagan quotas produced or accelerated the bifurcated Japanese industry we see today, with high-end, high-profit models such as Lexus, Acura, Infiniti, and the Toyota Prius being 100% — or close to it — made in Japan, while their cheaper models, the regular Toyotas and Nissans and Hondas, are 70% or so made in America. Engineering is almost entirely in Japan. Styling is in California.
The Big Three also were hurt in the early 2000s by Bush’s steel quotas, which raised prices on steel used in America, but which did not apply to steel used to build cars in foreign countries. Another protectionism backfire.
Although I despise GATT and NAFTA as managed trade, not free trade, the reader will gather that I don’t think protectionism is a good idea. There are better ways to save American industries: return to the gold standard, end the foreign wars and empire, massively cut taxes, massively cut government spending.
Instead, Bush, Obama, Reid, Pelosi, and Waxman are going to turn Detroit into the Big Three Green Yugos.
39 Comment by John Seiler on 5 December 2008:
@7, Dr. Fleming wrote: “Yes, and FDR, JFK, LBJ, and GWB do not even appear to know the value of money.” In one sense, two o them may have.
Although FDR devalued the dollar and seized private gold in 1933-34, after that he kept to the $35 price for gold, even during World War II when many on his staff wanted to end the gold standard for good. That’s why the postwar debt was not burdensome to the economic recovery.
The late Jude Wanniski wrote: “During World War II, the United States did not devalue the dollar, and it maintained its definition in terms of gold. The capital markets financed enormous deficits at 2 percent interest rates. The deficit in 1945 alone was 22 percent of Gross National Product, and the total publicly held national debt that year stood at 119 percent of GNP. The market knew that the government intended to return borrowed resources after the war according to the same standard of value.” (The Way the World Works, pp. 122-23, 1998 Regnery edition.)
If even FDR can stay on the gold standard — albeit not a perfect one — during World War II, then there’s no reason for any country EVER to go off gold.
(It took me three shots of Bulleit to get through writing anything nice about FDR.)
JFK praised the gold standard repeatedly and stayed on it. LBJ began weakening the link to gold with his wild spending on war, the Great Society, and the Apollo moon boondoggle. Nixon took us off gold, causing the 1970s stagflation that drove the middle-class into upper-income tax brackets. GWB gave Wall Street the gold mine and Main Street the shaft.
40 Comment by John Seiler on 5 December 2008:
Scott P. Richert @23 wrote: “I’m not finding the evidence to back up my vague memory, though, as part of the Chrysler loan guarantees, the federal government purchased Dodge pickups for military use.”
Thanks for bringing that up. Here’s what I found on Wikipedia’s Chrysler article: “The military then bought thousands of Dodge pickup trucks which entered military service as the Commercial Utility Cargo Vehicle M-880 Series.”
I didn’t know that until now. From 1979-82, I was a Russian linguist in West Germany in the 856 American Security Agency Co. – around 1980 expanded and renamed the 533rd Combat Electronics Warfare Intelligence Battalion. Also around 1980 we got a shipload of new Dodge trucks. Nobody knew why.
They were JUNK. The starters kept going out. I remember many times, on maneuvers in the dead of a cold Kraut winter, sitting freezing in one of the those Dodges, trying to turn the engine over while the starter kept going, rrrrrrrrrrrrrrrrrrchhhhcch, rrrrrrrrrrrrchhhcchh, rrrrrrrrrrrrrrchhdheh, rrrrrrrrrrchddchhh, rrrrrrrrrrdchchhh.
Good thing right then the Red Army didn’t come barreling through the Fulda Gap. Although no matter what in a war we probably would have been nuked pronto. Along with you back in The World.
41 Comment by pablo H on 5 December 2008:
How many $500 billion dollar deficits can we keep running year after year, before the globalists stop chanting “free trade good, protectionism bad”.
Its amazing, no matter how bad things get, or how well protectionist foreign countries do -compared to us – they keep chanting the same mantra.
Its the same insanity in foreign affairs., Billions in $$ and thousands of lives wasted overseas – Iraq, Vietnam, Korea, Afghanistan. Yet, anyone who doesn’t want to invade Outer Mongolia or put troops in Paraguay is an “isolationist.”
42 Comment by John Willson on 5 December 2008:
Please, my friends, do not be seduced by gold or stocks or any other metaphor for wealth. An economy (ask TJF what that means) is making stuff. If you make a widget, and the government finds a way to export your widget production to someplace else, in the name of “free trade,” the government has lost its consent of the governed. Or let’s look at it from the point of view of the laborer, who like my grandfather was treated like slime, and when he tried to organize a union was deprived of any job outside of politics, which gave him a living. He knew that politicians didn’t produce anything, but Democrats at least tried to protect men who did produce stuff. He may not have understood the metaphors of trade, but he comprehended very well how ordinary people live decent lives by making stuff that comes from the neighborhood.
43 Comment by Leon T. Haller on 6 December 2008:
As we are back to The Big Three, I’m going to reiterate what I posted to Mr. Piatak’s similar-themed article the other day, but which went totally unnoticed (though the points I raise ought to be addressed, here and by politicians). Possibly out of obtuseness, but I still think I say what should be said on all this:
Why should an independent businessman like me, with no bailouts (I’ve lost hundreds of K in the stock meltdown, including over 100k on AIG alone – no bailout for its shareholders!!), and no health insurance but what I provide for myself, working without any safety net or union in what’s left of the “free market”, get fleeced as a taxpayer to support the RIDICULOUSLY OVERPAID and UNDERPERFORMING union goons at the UAW, to pay for their generous health plans, early retirements, etc? NO, to Piatak, Richert, etc, that IS socialism of the ugliest kind, and therefore inappropriate for any site or organization billing itself in any way as conservative.
I am a staunch Buchananite, voted for Pat three times, and agree that we should have an America First government: first, wrt immigration, second, foreign policy (no more wars for Israel or the NWO), and third, economy, the latter by means of scrapping the income tax, radically slashing domestic socialism/spending, and replacing the limited revenue stream still necessary with a uniform tariff wall, which would serve both to limit overall taxation, as well as encourage domestic manufacturing. I assume you gents are with me here.
However, the crisis of the Big Three is a function of union greed, and American uncompetitiveness, pure and simple. It is a perfect illustration of libertarian principle. They did it to themselves, and in a just world, must suffer the consequences. I did not support the financial sector bailouts for libertarian ethical reasons as well. That sector, too, crumbled as a result of statist structural deficiencies (beginning with the very existence of the evil Fed, then its constant pump-priming, then the minority home loan project pushed by the Feds, and explained by Steve Sailer) followed by private sector recklessness in lending, then securitizing, etc.
However, much as I wanted the whole system to crash, if that is what Justice (ie liberty, ie the free market) demands, it is at least arguable that the financial sector, or at the very least the banks, being inherently bankrupt per Rothbard’s critique of the fractional reserve system, and thus relying on “confidence” to sustain activity, did need some “bridge liquidity”, or they could have failed en masse, which could have triggered social unrest (to which I, being a real Hard Rightist, say “Great!”, as well, let’s break out the guns and Take Back America for Real Americans – but I suspect the softer Christian communalists at CHRONICLES would not have been happy with the ensuing chaos and suffering).
There is no comparison between the social costs of Big Three failure versus systemic financial failure. That is why the financial bailout is somewhat less evil than any Big Three one would be, the latter having no justification in either morality or economics whatsoever.
44 Comment by Leon T. Haller on 6 December 2008:
To which I would add to #41:
The comments of Piatak, Richert and their colleagues (comrades?) are all either descriptive, or fuzzy-sentimental. The real issues, though, are moral and economic.
First, what is the moral justification for stealing my money to bail out the Big Three? That there were other (I believe) morally unjustifiable bailouts of late does not justify another one (”two wrongs…”).
Second, what is the economic justification for a bailout? From what I read above, it sounds as though I’m at some meeting between union representatives and Democratic party hacks. Who cares about lost jobs, how our parents or grandpas coped with the Depression (uh, maybe some of them had saved for a rainy day? see Aesop), or whether Fords or Chevys are superior (by what criteria? and are those criteria properly economic?)?
Capital is finite. It must be put to its optimal use. Such optimality is best determined through the dispersed knowledge inherent in the price system. Free market economic allocations are not just morally, but economically superior to all forms of state-directed investment. This is demonstrable through economic logic, and has been confirmed empirically repeatedly. (sigh) To take just the simplest examples: West vs East Germany (which I visited in the early 80s; total impoverished junkpile), South vs North Korea, Hong kong vs. China. Same racial groups, same or similar ethnicities/cultures, similar histories – until coerced, radical divergences of economic systems. Who won?
Capitalism is superior to socialism. PERIOD. END OF DISCUSSION. The essence of socialism is not wealth redistribution (which I hate, too – though I expect Mr. Richert to start discovering the virtues of “universal coverage” in a year or so – “it’ll help working families”, “govt can control health costs better than ‘greedy’ corporations”, “what about grandma and her meds”, etc), but economic central planning. The comments of many persons above have more than a whiff of Sovietism.
What does Mr. Richert know about the business of car making? Moreover, even an automotive economist cannot know better than the market itself how best to allocate capital between auto manufacturing and other uses. Wrt the Big Three, the market has spoken. They were not bankrupted by civil rights lawsuits, or sudden, dramatic tax increases (or acts of God, out of their control). The Big Three are going down because their sales aren’t good enough. No one is forced NOT to buy American (most of my cars have been American, though there were particular circumstances behind each purchase). If people aren’t buying their cars (or not buying them at a level to pay for all of the Big Three’s government and union imposed cost-burdens), then merely throwing money at them (aside from the immorality of this theft from taxpayers) will simply enable them to, in the words of Rothbard, “continue plaguing us with their inefficiencies”. If we prevent capital from flowing to its best uses in this manner often enough we will produce economic sclerosis, as did the British with their leftist economics pre-Thatcher, if not total immiseration.
I’ve been reading CHRONICLES for nearly two decades, and while the magazine and its editorial collective are excellent in many areas, they have always exhibited two intellectual weaknesses. One of those is economics (the other is race and eugenics, but those are matters for another time). I had hoped things would improve with the influence of Rothbard in the early 90s, and that the formation of the John Randolph Club would lead libertarians to a better appreciation of traditional values, racial and cultural as well as moral, and (paleo)conservatives to a better understanding of free market economics. Apparently, neither of those salutary hopes has been realized. And so it’s getting time again to reinvent the wheel.
45 Comment by BadCompany on 6 December 2008:
I respectfully disagree. Government policy for three-quarters of a century has been to subsidize Detroit via the interstate highway system and the pre- and post-WWII destruction of a once thriving mini-mass transit system built on trolleys and commuter trains. My home state of NJ once had a great trolley system but GM, Goodyear, Robert Moses and corporate-government partnerships were well on the way to destroying that messy but more organic way of moving around by the time I was born nearly 50 years ago. Like most suburbians I’m addicted to my autos, but at least I’m aware of the fact that the automobile has contributed to the isolation and coarseness of society and the plaugue of suburban sprawl.
The last thing this county needs is an auto bailout. The second to last thing this country needs is massive Kensian stimulatory government spending on building roads. Do we really want the auto companies to be nationalized? Will the government run them any better than they have been run? If there is any chance that the little three can be profitable again, then maybe cut the corporate tax rate on at least auto industry related firms to 25% and capital should rush in — if there is any chance that the firms can be profitable in the face of foreign subsidized competition and stifling environmental and labor regualations here in the US.
Today’s auto industry is stale, mature etc. Nothing like the innovation that was taking place in Michigan 50 to 100 years ago and is still taking place in smaller firms in Silicon Valley, and other places around the US today. Assembling cars and manufacturing parts is relatively low tech and not innovative and should be done where labor is cheap: Brazil, China, India and Russia for example. Let the creativity happen here in CA, IL, MA, NY and PA. The best thing DC can do is get out of the way.
46 Comment by John Seiler on 6 December 2008:
Dr. Willson @ 40. I don’t know if this post refers to my mentioning the gold standard. But perhaps I was not clear, so I will add a few words.
I am not calling on people to buy gold. I am not a commodities broker. Maybe it’s a good idea and maybe it isn’t. Gold has declined in price in recent months.
Rather, I am saying that, historically, gold is the best “unit of account.” It’s a measurement, like a yardstick.
If the Bureau of Standards tells us that a yard now has 2 feet, does that mean it has 2 feet? No, a yard always has 3 feet. But the government can compel us to use a 2-foot yard.
In the same way, when the government inflates the dollar — moving its value from $35 an ounce in 1971 to $800 in 1980 — the intrinsic value of things has not changed, only the accounting of it has. Legal tender laws force us to use the inflated dollar.
Inflation happens because some people benefit from it, while the rest of us pay the price. It’s a form of robbery. A gold standard makes the robbery harder. It makes the government, in particular, more likely to use honest bookkeeping.
The best solution would be to get rid of legal tender laws, so one could use, say, the Swiss franc for transactions in the USA, or just just use gold coins. That would keep currencies honest. Second best would be to return to the pre-1971 gold standard, with gold pegged at, maybe, $500.
In short, I just don’t want to return to the 1970s. One disco decade is enough.
47 Comment by Miles Gloriosus on 6 December 2008:
@32Mr. Stonehouse wrote: “The news another 500,000 people lost their jobs last month, bringing the total for the year to two million, makes me sick to my stomach.
On the news this evening I heard if the Big Three go down, expect another three million without work. Add to that the tens of thousands that have already lost their jobs in December.”
To add insult to injury many on the right are calling this “The Obama Recession.” While I don’t like America’s new messiah, folk like messrs. Limbaugh and Hannity should be honest and admit Boy George Bush screwed over the country big time and that his globalist policies pursued to their logical ends are toxic to American society.
If they asked him, George might even tell them that the first thing he learned at AA was that you can’t begin to solve a problem if you don’t first admit you have one.
48 Comment by R. McCabe on 6 December 2008:
Mr. Richert @18
“I agree that changing the perception is necessary—and to be honest, I don’t know how that can be done, short of people buying domestic vehicles and being satisfied with them.
How do you convince someone who buys foreign models exclusively that he’d be just as happy with a domestic one?”
@20
“If, after all these years, they can have that kind of devotion to one of the Big Three at the expense of the other two, how can we expect those who have been happy with their foreign cars to be any different?”
I don’t know anyone who buys foreign cars out of a sense of devotion. The devoted types are only Americans, who drive Ford trucks and put stickers of Calvin taking a leak on a Chevy symbol. If that is why they buy their cars, that is up to them, but there are other reasons to buy vehicles.
Like when I was buying my truck (nearly 10 years ago), every search showed that Toyota trucks lasted longer, were more fuel efficient and had much higher resale values. No one buys used American trucks (i was buying used), because they don’t last long enough, and it’s essentially cheaper to go with new F-150s – the big 3 practically have to bribe people to buy their trucks with 0% financing or huge cash back offers that the “foreign” superior trucks don’t need to use. So all this talk of offering american consumers something extra has already been tried and exhausted — and it misses the point.
Every friend of mine who drives an “american” car that is older than 5 years or has more than 50,000 miles has a rattle and feels like it will fall apart on the highway.
Indeed, if the Big 3 wish to change the perception of American cars, they must change the fundamentals of American cars even if that means temporarily buying more foreign parts or designs. I know we say they have been doing this, but it is not enough to improve – the Japanese improve too. We must improve *faster* than the Japanese are improving.
To this end, the Steve Jobs comparison is interesting. His apple computers are much like the foreign cars. They are superior in quality, and although they are more expensive at first, their total cost of ownership is much lower. All he’s done is put a stylish intuitive front end and feel to a superior foundation of UNIX kernels. The only thing Microsoft had was market inertia – when pops goes out to buy the family computer, it *has* to be compatible with the one at work. Jobs may have charisma, but that isn’t why people buy Apples. And inertia may be the only reason left why people buy “American”. It would be easy to recapture the lost market share, if Big 3 possessed real quality.
As to a separate perception the Big 3 could change, it would be to dismantle completely the Unions. I grew up in a family that, for lack of a better way to put it, resented union workers for their high pay and kushy jobs. Truck drivers could afford boats and country houses, and most of the videos I’ve seen of the auto industry shows those guys not even dirty or sweating. There’s no more ‘hard work’ ideal with such manufacturing that inspires camaraderie. Nor, as TJF pointed out, is there any craftsmanship either.
If the big 3 made their cars 100% American-parts-made-and-assembled with zero union overhead, you might find some perceptual changes that people might even pay a premium for, with comparable quality of course.
49 Comment by Scott P. Richert on 6 December 2008:
R. McCabe (@44):
You’re missing my point. There’s a reason I said to assume perfect parity in price and quality. It’s simple human nature: When we’re happy with a particular product, we really have no reason to want to switch, much less feel a need to switch. If we’re that way with our brands of coffee or a particular variety of apple, why wouldn’t we expect to be that way with a $20,000 product? In fact, the very cost of the product makes us more likely (it seems to me) to go with the tried and true. Thus, someone who has been happy with a particular brand/model of car is likely to stick with it, and it’s going to take something rather significant to make him want to change.
Sigh. Well, Mr. McCabe, now you can say that you know one person who drives an American car that has over 50,000 miles that neither has a rattle nor feels like it will fall apart on the highway. Of course, since I know plenty of other people who can say the same thing, I suspect that you’re engaging in a little exaggeration that isn’t particularly helpful to the conversation.
50 Comment by Scott P. Richert on 6 December 2008:
R. McCabe (@44):
I’ve been thinking about this comment:
I hadn’t suggested that (as I tried to clarify in my last comment). But this remark made me think about how this debate has shaped up on this site over the past few weeks.
Going back through the comments on this thread and others, my memory proved correct: No one who owns an American car, or has argued for the loans, or has simply expressed willingness to consider the loans, has attacked the quality of foreign cars. No one. In fact, I’ve probably come the closest: In response to someone who made a typical over-the-top remark about all American cars being pieces of crap, I pointed out that I’ve known plenty of folks who’ve had problems with foreign cars, too.
But here’s the thing: Several people, including Mr. McCabe, who own foreign cars have gone out of their way not only to talk about the historical problems with the quality of American cars, but also to insist, often in the most over-the-top terms (”feels like it will fall apart on the highway”), that the quality problem persists across the board in American cars up until today.
When Tom Piatak and others present objective quality ratings that show that, today, American cars compete quite well on quality, these people continue to insist that they’re right and the quality ratings are wrong (”It would be easy to recapture the lost market share, if Big 3 possessed real quality”). When I and others point out that our American cars must be exceptions, since they don’t live down to Mr. McCabe’s and others’ claims, they continue to insist that our experience can’t be true (”inertia may be the only reason left why people buy ‘American’”).
If this attitude doesn’t come from “devotion,” then where does it come from? Or to put it a different way: I rather hope that it comes from a sense of devotion or loyalty to a brand that has served them well, because any other option doesn’t reflect well on those who have made these vituperative comments.
51 Comment by R. McCabe on 6 December 2008:
Mr. Richert, I was not trying to be “vituperative” as you put it. I am sorry for speaking perhaps overly broadly. And thanks for a new word.
I’m aware of some of the ratings saying US cars are getting better, closer to foreign cars. That’s great. That doesn’t change the point of my post, that a perceptual makeover is not enough. That perception must be rooted in fundamental causes, like leveling the playing field of the U.S. unionized auto workers vs. everyone else, closing the quality gaps and perhaps holding a higher ground on principle from within — saying we use 80% US parts, they 35%, is not a principled argument that would cause most dispassionate car buyers to switch back to U.S. cars. I apologize if I misread your comments as suggesting the question, “How could we possibly win back foreign car buyers when they are just as stuck on their cars as we are on our brands?” If the stuckness is the same, I was only trying to say that it has very different causes.
I’m glad you have a great car – I wasn’t trying to get personal. I was simply trying to relate my experiences and those of very many of my friends, and forgive me if the “objectiveness” of a magazine doesn’t immediately outweigh the subjectiveness of experience – perhaps this is the perception you are taking about.
One of my buddies just traded in his truck for one of the new, little gas-friendly Fords, and he and his wife love it. I hope he still loves it in 5 years. I stand behind my comments about new vs. used American cars within the past 10 years and the financing gimmicks.
You and several others have made very convincing arguments for supporting the auto bailouts, and I am on board. But I fall short of becoming optimistic that the Big 3 will succeed long term, in spite of gains made. I accept the lesser of two evils argument in this case. But I don’t believe that this lesser of two evils will blossom into a good, anymore than I think McCain would have been a good president.
If we were to get to the point where it was Coke vs. Pepsi and people were merely brand loyal, that would be a good problem to have. But that is nowhere near the horizon I see.
52 Comment by Etienne Gervaise on 6 December 2008:
I own a 1999 Ford Ranger for which I paid 15000 new. I drive 50 thousand miles a year. The truck is now at 423,000. I have replaced the tires as needed, the clutch twice, the brakes a few times, and the shocks twice. I change the oil every 5000 miles. The engine is the original. Perhaps Ford built the truck too well, and that’s why sales are bad. I took it in to get the spare tire mounted underneath. The mechanic said there had been a rash of suck repairs due to theft and the new device would be harder to steal. The price of a new Ranger is 17,000 dollars, not much of an increase in 9 years, certainly less than the rate of inflation.
So don’t hand me that hoohah that Americans are making lousy vehicles. My other car is a 2004 Cadillac CTS sedan with 80,000 miles and it runs like a dream, it has needed nothing more than oil changes and a couple of light bulbs.
53 Comment by Etienne Gervaise on 6 December 2008:
* not suck problems but “such”..
Anyway, the reason the Big 3 are going cap in hand to Uncle Sucker is that they made no money selling cars. Their profits came from lending money to car buyers. When the bottom fell out of the debt market, it was only a matter of days before GMAC, Ford Credit et al. felt the pinch too. This is not an auto bailout, nor is it a concession to UAW voters in Michigan and elsewhere, but it’s all tied in to the loan business. The bright side is that there will still be a market based on servicing existing vehicles as the general public stretches the life of what they already own.
54 Comment by Leon T. Haller on 6 December 2008:
I cannot believe the ignorance of this discussion. What is the relevance of how this small online community feels about American vs foreign cars to the larger isue of a multi-billion dollar bailout of Detroit? This is what I meant above (in part) by pointing out the lack of proper analysis in this discussion. How you/we “feel” is totally irrelevant. What is the moral justification for stealing taxpayer money to subsidize a particular industry, when most of us are left to sink or swim on our own in the marketplace (which is exactly how it should be)? And what is the economic justification? I note the author simply ignored these points when I raised them in #’s 41, 42.
The only possible justification for a Big Three bailout would be a national security one: that we need that productive capacity for possible military uses, and that it is irreplaceable. But that argument must be proven, not merely asserted. I am very disappointed.
55 Comment by Lee on 7 December 2008:
I think part of the problem is that people have forgotten what an economy is for. While it may be more desirable to be wealthy than not, it is not the primary purpose of the economy to make anyone or all of us rich. Wealth originates in the soil and the craftmanship that is brought to bear on the products of the soil, not from shuffling paper (including the rice paper our money is printed on) useful as some of that is. The US auto industry (along with many other industries especially financial and government) from top management to the security guards seems to have morphed into a colossal enterprise to enrich its members more than their neighbors are able to enrich themselves. Very few of any of these people are happy with their lot in life. Although I don’t work in the auto industry, I have visited a number of plants and the emotional tension in them is horrendous. Managers and employees are barely civil to each other when they are not outright abusive. Furthermore, the working conditions, although they may be “safe” and efficient are often inhumanly boring and repetitive — not a good trade-off.
56 Comment by Lee on 7 December 2008:
I think part of the problem is that people have forgotten what an economy is for. While it may be more desirable to be wealthy than not, it is not the primary purpose of the economy to make anyone or all of us rich. Wealth originates in the soil and the craftmanship that is brought to bear on the products of the soil, not from shuffling paper (including the rice paper our money is printed on) useful as some of that is. The US auto industry (along with many other industries especially financial and government) from top management to the security guards seems to have morphed into a colossal enterprise to enrich its members more than their neighbors are able to enrich themselves. Very few of any of these people are happy with their lot in life. Although I don’t work in the auto industry, I have visited a number of plants and the emotional tension in them is horrendous. Managers and employees are barely civil to each other when they are not outright abusive. Furthermore, the working conditions, although they may be “safe” and efficient are often inhumanly boring and repetitive — not a good trade-off.
And thanks to our enslavement (not all of it voluntary) to the financial industry and their apologists, the economists, we are shedding our manufacturing industry, we are firing our farmers, mining the dirt with GMO corn and soybeans and wheat, and sterilizing the once soil with toxic chemicals, we are subject to an “education” industry whose sole purpose is brain washing the citizenry, we are increasingly subject to spying by our police forces on behalf of our government, and we are watching as corporatists, in the name of capitalism, reap huge rewards for sending our white collar work to India and other places. (The Federal Reserve estimates there are or were 50,000,000 such jobs and that everyone of them is exportable.)
The good news is this can’t last. The rest of the planet is just as capable and creative as we are at producing pretty pieces of paper and probably like their own designs better than ours. If we want things, we are going to have to make them. If we want to eat food we are going to have to grow it.
57 Comment by Josh Cooney on 7 December 2008:
During the depression my grandfather’s family moved out into the country so that they could grow a large garden. It was a tough life but it was better than starving and, moreover, they were able to cultivate family and community life. I suspect that this was the case for many people of that era. Times were hard but they made do and their lives were still fully human. We are in a much worse place than in 1929. Few people own property and even fewer know how to grow food and keep animals.
Lee is correct, industrial style factory work is dehumanizing. But the managerial-bureaucratic economy is even worse, it is pure evil. I see no evidence that civilization or even basic human culture can survive this demonic revolution. I think our society could survive if we had some semblance of balance between small farms, local businesses, and industrial factories. Even if this model only made up 25-30% of the country. I see no evidence, however, that religion, community, and the environment can survive a purely technological/industrial/managerial society. Since manufacturing can actually fit into a workable cultural model, then we can justify its preservation.
Nobody in their right mind can justify preserving any form of the Wall Street corporate-bureaucratic model. If anyone can point to a society in history that has survived the destruction of religion and community, caused by, among other things, hypermobility, urbanization, divorce from nature, devaluation of children and motherhood, etc. please let me know.
58 Comment by J. Meng on 7 December 2008:
@51, Lee, forgive me, I lost the seeming intent of your comment, which was to inform us:
“…what an economy is for. While it may be more desirable to be wealthy than not, it is not the primary purpose of the economy to make anyone or all of us rich. Wealth originates in the soil and the craftmanship that is brought to bear on the products of the soil, not from shuffling paper (including the rice paper our money is printed on) useful as some of that is.”
Then you jumped to the “morphed auto industry” existing to enrich itself and other unlikable conditions within that industry. Somewhere, along the way, I missed your definition of the purpose of an economy.
59 Comment by Mr. Stonehouse on 9 December 2008:
Mr. Haller is correct in all his above posts. There is no moral justification to take money from productive people and give it to the unproductive.
My earlier post was just sentimentality and wishful thinking.
60 Pingback by When small men cast long shadows… — 1389 Blog - Antijihadist Tech on 10 December 2008:
[...] And no, it is not possible to sustain a “service economy” without a viable manufacturing… Not that there is a service economy to sustain – the real estate bubble has already burst, the remains of our financial sector are being artificially propped up with money that we do not have and cannot earn, and much of our service sector employment has already been outsourced! [...]
61 Comment by 1389AD on 10 December 2008:
It’s 1929 for sure, and here’s why:
When small men cast long shadows…
62 Comment by EE Roberts on 10 December 2008:
“those cheap foreign-made vehicles the “market is god” folks are celebrating won’t be so cheap if the U.S. automakers go under. That means foreign dominance and a loss of liberty.”
Of course, if the bailout of the big 3 proceeds, the fedgov will gain control of US auto production. Then we can have the worst of both scenarios: the US auto industry going under and increased federal dominance and loss of liberty, life and property. Maybe the slim possibility of “foreign dominance” isn’t as scary as it seems to you right now.
63 Comment by EE Roberts on 10 December 2008:
“The news another 500,000 people lost their jobs last month, bringing the total for the year to two million, makes me sick to my stomach.”
The sickness is from fear. Fear is what the news media serve up daily. It’s a necessary component of the program conducted by the news media to promote the agenda of totalitarian government. Turn off the TV, Mr. Stonehouse. The cloud of fear under which you live will begin to lift soon after you stop allowing the input.
64 Comment by Scott P. Richert on 10 December 2008:
Apparently, Mr. Roberts (@61) lives in an area where the unemployment rate is dropping, rather than rising. Good for him. Some of the rest of us do not. I do not watch the TV news–national or local–but I walk down streets where I see houses that have been on the market for over a year, from which people have simply walked away because they can no longer afford to pay their mortgage(s), having been out of work for far too long.
Yes, the news media love to play on fear. But that doesn’t mean that what they’re reporting is entirely untrue.
65 Comment by Mr. Stonehouse on 10 December 2008:
Mr. Roberts
It isn’t fear–I am self-employed and secure. I am also surrounded by family and friends who take care of each other. It is sadness for what is happening and what likely lies ahead.
66 Comment by Etienne Gervaise on 13 December 2008:
@57 Josh
… industrial style factory work is dehumanizing. But the managerial-bureaucratic economy is even worse, it is pure evil.
True! I just watched Mike Judge’s brilliant movie Office Space last night, and I thank God I chose to become self-employed to escape the sinister office routine. My job was so unfulfilling, and my boss so cowardly, that I knew I’d never be fired. The routine was so impersonal that I was forced to quit of my own volition and make my own way in this cold, cruel world.
67 Comment by J. Meng on 13 December 2008:
@66, Etienne Gervaise,
In #52 you said you traveled 50,000 miles a year and have 423,000 miles on your Ford Ranger. You are also in business for yourself. If I am intruding, please ignore my questions, but are you in a service oriented business, and if so, what kind of service? Or is it a product you manufacture and sell around the country?
68 Comment by H.F. Wolff on 13 December 2008:
65Mr. Stonehouse
66Etienne Gervaise
You gentlemen are self-employed… as am I.
And I certainly wouldn’t have it any other way.
However, why do you believe that this economic tsunami will by-pass you? It certainly has begun to impact my revenues but, I saw it coming and made appropriate plans by foregoing major expenditures for the last 2 years.
I’d be interested in hearing your views. Thank you.
H.F. Wolff
69 Comment by Etienne Gervaise on 14 December 2008:
@67 J Meng
If you must know, I’m a construction consultant — dealing with the paperwork end of things. An entrep[reneur if you will who goes between the construction company and the local government. To quote Office Space — I have people skills dammit!
@68 HF Wolff
I do not expect to evade any downturn, but being in Ruburban Washington, downturns are not as bad as they could be elsewhere. I do hedge my bets by planting Norton grapes in my backyard. A local winery will buy everyting I can harvest.