Run out and buy a Denali
Congress is having fits trying to figure out what to do about the big 3 US carmakers. Let them sink? Give them billions and billions and billions of dollars? Retool them to make buses and repair bridges? No that last one isn’t a real proposal, at least not that I know of. Barbara Mikulski’s is real though.
Mikulski did not call for the $25 billion worth of federally guaranteed loans that Reid is seeking. Instead, she offered her own proposal costing $8 billion: tax breaks for those buying cars between now and the end of next year.
That’s the stupidest thing I’ve heard in – a day or two anyway. What a good idea! Give people tax breaks to encourage them to buy bad dangerous oversized gas-guzzling pedestrian-flattening planet-destroying cars!
Yes I know thousands of jobs are at stake, but other things are at stake too, and as everyone keeps awkwardly noticing, the US car industry is flailing partly because it makes such bad stupid cars. I think we should go all free market on their ass and say the invisible hand has spoken, go make tinker toys.
I fear that you are correct. Why throw billions at what is probably the buggy-whip industry of the twenty-first century?
You’re rigt but this is nevertheless an opportunity: you can get rid of many an overpaid ‘captain of industry’, and you can force change. For instance we could split up these monsters of concentrated capitalism in smaller units that try to be the best in making products for free markets instead of the big 3 carving up the government sponsored citizens (just to realize that foreign companies maybe paid less attention to politicians, and more to better cars).
Anyway, going ‘free market on ’em’ will penalize the wrong people: for the boss it will just mean more golfin’ time, as he surely has ‘diversified’ his assets, because even in a financial crisis: you have to have assets to be able to loose them.
I agree that the big 3 have been making big, stupid cars, but if you’ve ever passed a Toyota or Honda SUV on the road you know that Japanese car makers got into the big stupid car making too. And, to be fair, the big three have been making pretty good mid to small size cars for some time now. Chev introduced its hybrid Malibu last year, and its Impala has had fuel saving features for a few years. It’s too easy to say nasty things about the big 3. One of their biggest problems is the fact that they haven’t scaled production to the size of their market, and haven’t sought, until recently, large markets elsewhere. Actually, the big 3 cars are (or were) selling like hotcakes in China.
Add to this GMs plan to introduce the Volt, a completely electric car, within 2 years, and it looks to me like there’s something worth saving here. Besides, the cascading bankruptcies which would follow failing to shore up the big 3 would be enough to put the US in recession for two to three years.
Wouldn’t it make more sense to provide backing for the big 3 predicated on a plan to produce more innovative fuel economic design (designs they already have in the works, by the way) while cutting back on big stupid vehicles, than to let them go through a phased bankruptcy that would achieve the same end at greater cost to the economy?
Eric, you’re right but the ‘big 3’ have been on the non-free-market drugs (this lobbying, that subsidy, another tax cut and so on) for decades so it should not be an option to keep them as is – given you’re right (they should not bankrupt) the only sensible courses of action are those that involve nationalization with consequent break-up in at least ten new companies (including some, why not, for bus-making & bridge-repairing).
It really is time to stop big=beautiful because it is (much more than increased state involvement) a structural threat to the free market.
Time to make this point – AT&T break-up was good, consolidation is bad. There’s need for state-enforced limits how much capital can be concentrated in 1 entity.
Yes, JoB, breaking up the big three might be a good idea, and it would make them much more competitive too. But it would be unfair to characterise everything they do as big and stupid. It’s not, and the big three have got a bad rap on that score.
Just for the record, I drive an Impala, and on the highway get about 32 miles to the gallon (Imp.). Now, that’s pretty good for a mid-size to large car. Two of its cylinders turn off automatically at cruising speed. My daughter has a VW Golf (or equivalent), and she doesn’t get much more for a much smaller car. But there is more fuel economy still to be had, and that should be a condition of any help offered to the American (and Canadian) auto industry.
Yep, Eric, it would be unfair to those many excellent individuals that do the real work in those big elephants.
Still, I wonder why breaking up is not on the agenda. This crisis is a crisis of bigness but the only thing that has come on the agenda is patchwork. Ideas to force the companies to go in such & such a direction are counterproductive as the only good idea in the system is to decentralize the decisions of where to go to (Bush’s rhetoric on the basic good of the free market recently was – uncharacteristically, spot on).
I might agree with JoB’s first comment if I really thought we would be getting rid of overpaid “captains on industry.” Nope…ain’t gonna happen. There would be plenty of lucrative “consultanting” and lawyer fees and account charges and financial manipulators being paid off in any such devolution. Meaningwhile, the union labor is what will be “gotten rid of.”
Not sure what the answer is. Maybe the car industry is obsolete and should be allowed to fade. Three million jobs, though…wow. Being originally from the midwest, that’s a scary thought.
Heck…maybe the bigger issue is “the economy should fail.” Can we continue to support a western style lifestyle and economy in a world whose climate is supposedly collapsing? Which, sadly, brings us to the bigger issues this site and blog are concerned with: a much poorer United States will be an even more fundamentalist and scary-religious place?
I’m a tyro in political economy. In fact, political economy isn’t really taught any more, as though the two things can be considered separately. The scenario suggested by BrianM is more than a bit scary. More frightening still is the effect of a collapsing economy on a population, a large part of which is mired in poverty already. I’m not sure whether Americans are really aware of how anomalous their economy is in relation to other national economies, where there is often a social safety net to catch those who are allowed to fall off the ladder. Are they aware of what the collapse, not only of their economy, but of the major engines of that economy, would do to the poorest of the poor?
I grew up in India in the forties and fifties. That’s a long time ago. But, to tell the truth, I never saw the kind of poverty in India, to such an extent, that I witnessed in rural Alabama in 2004. If America is threatened by fundamentalist, scary-religion, a lot of it lies in endemic areas of poverty that blanket the US in a disturbingly widespread way. And the obscene wealth compared with the obscene poverty in the US is simply a motor for equally disturbing apocalyptic religion.
Clearly, from their inadequate responses to Congress members’ questions, the big three need to have their leadership overhauled. Perhaps they need new leadership all round, including union leadership. But Congress should be prepared too. All they seemed able to do was to ask questions of the big 3 automakers. They had no alternatives to offer. What’s the matter with American political leadership? Is it so incestuous with business leadership that it has nothing to offer except the same story told by both? If so, Obama’s change – if that is what it is – came just in time – or did it?
Brian,
Maybe you’re right on one thing: these captains of industry might well remain rich and continue their annual rituals in Davos. But that will be as it may – whether the rich are too rich or maybe simply rich for the wrong reasons does not matter (and certainly I don’t want to be a part of a society that decrees what are ‘good’ reasons for richness – although I might be tempted to live in a society that puts bounds on how rich an individual can become).
What matters is that by limiting sizes of organizations one saveguards what’s essential to the free market: an equal access to it. Not concentrating powers in the hands of a few is essential, it is specifically essential for progress of independent critical thought & it’s therefore the best protection from the domination of idiot religions.
Can’t disagree with much of what you say, JoB. My pithy, simplistic political catch phrase is “The Solution is Dissolution”-I think megacorporations are not the only things that are too big in this world.
My only caveat is too often the doings of the elite can be pernicious and cause disaster for the society as a whole. I have no solutions to this-I think it is endemic in human society, but I certainly want a culture that spends less time exulting these “Titans of Industry” and holds them, at least morally, to account.
The alternative is to make fun of ’em, they are after all a sorry bunch.
All this high-minded discussion is good, but for some reason I’m obsessed with the phrase “the invisible hand has spoken” in Ophelia’s post. I wonder… If a major auto company (or any company) complains about their fiscal woes, should well tell them “Talk to the (invisible) hand!” When the invisible hand talks, does it have a little face drawn on it, like Señor Wences’? And how would we know, it being invisible and all?
Apparently I’m not up for weighty economic matters today.
I thought no one was going to notice my little joke.
The net has a way of corrupting one’s reading powers. I never noticed! Sorry OB. Thanks G.
Obviously, when the invisible hand speaks, it uses sign language.
Or maybe, in this case, a slap delivered with its back side.
-CM
The US system is a crime and one that, through the competition between states for lowest taxes and companies for the highest profits, risks destabilizing a complete world.
A national health system should be the first thing put as mandatory to become a part of global free trade.
Anything less is protectionism – it is about time we stop the free market and the invisible hand being taken hostage by golfers holding annual bonfires, in Davos of all places.
Next time they should force the senile bastards on a snowboard to release ’em at the top of a red downhill slope.
And whilst they’re at it we should put the uncritical journalists that are so bloody glad to be allowed in there, in bed with the equally senile old wifes.
(no, not wanting to be sexist here but I’ve yet to see the normal intelligent women being admitted in the cigar-fest they hold annually)
LOL. Viva la revolucion, JoB!
JoB accidentally reveals his day job as Finance Director of a US carmaker, with an invite to the annual cigar fest. His picture can be seen here: http://www.robotsandwrestlers.com/wp-content/uploads/2006/07/Monopoly-Man.jpg
I’m not that fat, have strict no-cigar no-pipe policy (but smoke a lot) – but what annoys me CP is this: I am not in finance! I’d rather rejoin the church.
Just to get the record straight for the moment I will be depicted on T-shirts & other revolutionary parafernalia.
It’s probably not that Obama doesn’t understand it, but that it’s a matter of political realities.
No, Eric, not a crime. That was just a hyperbole. Maybe it should be one.
My deep apologies for the libellous JoB description, JoB. As they say, (not even) ‘close – but no cigar’.
Speaking of job descriptions – what is the thinking over there in America on the latest diplomatic post, allegedly being given by Obama to HRC? If she accepts this high profile job, does it mean in essence, that she cannot, in the future, run for the American presidency job?