Capitalism, unregulated, provides remedies to its own excesses. You charge too much for your goods, demand plummets and you're forced to lower prices to get customers back. A company gets too big and competitors can move in with nimble action, meeting demand for new products before the big company can.
Unfortunately, like the weather, the economy isn't concerned with our comfort. The greatest market correction in memory went by the nickname "The Great Depression." It was a reaction to the sales of exotic financial instruments such as margin selling, and it started by taking down the stock market. Then the world followed, and stayed that way for ten years. People starved for want of a job. People froze because they couldn't pay their bills. Your great grandparents are still freaked out by the depression; it changed the way they think about consuming.
And Republican senators, known for their love of free-market policies, are hell-bent on another Great Market Correction.
Here's what will happen when we fail to bail out the auto makers: It will punish greedy auto executives and union bosses. Great! They'll lose their jobs. So will assembly line workers, parts suppliers, car dealers across the country and their sales staffs. These people, without jobs, will fail to buy stuff the other stuff that Americans make, and the people who work for THOSE suppliers will get laid off. It will be good for the economy in the long run, because the market won't be artificially inflated. It will cut the fat, just as the unemployed individuals will lose weight because they can't afford to support American agriculture like before. So after ten years, perhaps another World War as a stimulus, we'll all be on our feet again. And hopefully we'll win this one too because I don't want to be forced to face Mecca twice a day.
The way it looks right now is we're going to get another great depression but at least we managed to save the bankers before the ship went down this time. Women and children last! If only the collapse had waited another 5 months when a Democrat was in charge.
(Since the big three are as good as screwed at this point, Robert X. Cringely has some excellent advice on ways to remake the American Auto Business, asking how would Steve Jobs fix the problem? I love the way Cringely thinks, and he's retiring next week. Just when we need you most, Cringe!)
I'm confused here.
ReplyDeleteAre you now in support of a bailout of the Big Three?
I am against any bailout. Any government intervention. It's the government's fault this is happening in the first place.
ReplyDeleteI think Piker has gone John Kerry on us, Publius.
ReplyDeleteFirst he wa for the bailout.
Then he was against it.
This post appears to have him leaning back towards it.
I didn't realize it was so difficult to be able to tell right from wrong..
No NOT KERRY!
ReplyDeleteYou mean..
Halp mi Jon Kahrie. I am stuck in Eyerack!
THAT GUY!?
The one that Obama has completely snubbed with his cabinet appointments even though John F'n Kerry tried really, really hard to be all smart about foreign policy and stuff?
THAT one?
I always know when I'm onto something with you guys when you attack the messenger but leave the message untouched. It's how you maintain moral clarity!
ReplyDeleteSo seriously, what do you think - is there a downside to letting the market sort our problems out or not?
I will gladly answer your question, after you answer mine.
ReplyDeleteNo pressure. Feel free to not answer my question.
ReplyDeleteEven though you choose not to answer my question (which is an answer in itself, isn't it?), I will answer yours.
ReplyDeleteOf course there is a down side, and it is the human aspect of the market correcting itself.
No one wants people to lose their jobs. Especially in a bad economy, and especially during the holidays.
Loss is a fact of life. Jobs come and go, relationships begin and end, and life goes on.
I feel for the people that will be affected directly from the Big Three going down. I also feel for the other people who are laid off that won't make the front page of the newspaper. Bad businesses fail every day.
Who decides which busineeses get to "live", and which "die"?
Our Government can't even keep illegals out of the home of the Director of Homeland Security, but somehow the Pols in DC understand how to make cars better than the morons that have done it for the last 100 years?
It would be less expensive to the US taxpayer to buy the Big Three, than to loan them money that will surely disappear.
The Gov't can't/won't tell us which banks got 2 trillion in loans, but we are supposed to trust them with 15 billion more?
Piker, I don't really care if you have changed your position again, just curious as to what made you change your mind this time.
I keep forgetting to comment on the article linked in your post.
ReplyDeleteThe author advocates outsourcing and shutting down the very plants that the bailout will keep open. how does it make a difference if the jobs are lost by closing plants due to no money, or by being outsourced? Those people are still out of work.
He also ignores the UAW. They won't just let plants shut down. That's how the Job Banks came into existence in the first place.
He also ignores the huge pension deficit. $1900 of profit from each car sold goes to pensions. Does Jobs just ignore that?
Okay, now that you've answered...
ReplyDeleteI'm still not for the bailout, but you'll recall I AM for applying the bailout money to unemployment benefits. That way, we lose the manufacturing but we still have the consumers. And I don't see any sign of the Senate pursuing that option. Just letting the industry collapse is the greater of all the possible evils here.
Gee, it's too bad about the pension money but that was the deal the big three made to attract labor. You're arguing that the only way to save the business is to welch on a deal. I'd submit that that is the best way to stay out of business forever. I could see refusing to make that deal with new hires, but to deny pensions now is like a twenty-year retroactive pay cut. It's like being told "we never mentioned this, but that money we took out of your check was to make sure that our CEO wouldn't have to buy off-the-rack after we lay you off."
If you bust the unions, you just take all the power from the employees and put it in the hands of management. Management then takes the money and runs. I don't see a reason to fight for that.
Steve Jobs addendum - one of the ways that Jobs has kept the unions out is by treating labor well enough that they don't feel the need to organize. He's not the easiest guy to work for (the tantrums are legendary) but he has the good sense to pay more for human resources and charge more for the end product, and he's one of the few computer companies turning a profit.
ReplyDeleteIf there is no money to pay the pensions promised, there is no money.
ReplyDeleteJust like Social Security. You and I have been paying into that fund for all of our working lives, and there won't be any there when it's our turn to draw from it.
How will Mama Government take care of all of us then? Me, I'm banking on my own persoanal savings for retirement. If there is Social Security in some form, great. If not, I'm prepared.
Yeah, well, a lot of people are prepared to fend for themselves if social security fails. They have pension funds through their employers. See why this is important?
ReplyDeleteYour last two comments are somewhat contradictary. You say if the Unions get busted, then all hope for the workers is lost. Yet you then say Jobs got around the Unions by paying a better wage to attract better workers. Isn't the Jobs example a great one of how the free market is better than a regulated one?
ReplyDeletePiker, the percentage of people that have pensions is miniscule, and you know that.
ReplyDeleteHowever, everyone that has ever paid taxes has Social Security.
To your example of all those that were promised by the Big Three a pension, what about all of the rest of us that were promised Social Security by the Government? Who bails us out in 20 years?
Steve Jobs would have been able to get workers at Wal-Mart wages if he didn't have to lure them away from unions. Without collective bargaining agreements, our country would look a lot more like Mexico.
ReplyDeleteConcerning pensions, perhaps it would clarify things if I say I'm including 401ks under that description. You make voluntary contributions to that, and when a big corporation declares bankruptcy they always argue that's the first thing they have to be allowed to default on. I'd like to think maybe executive bonuses should be higher on that list.
If the idiots in Congress had given every voter a million dollars it would have been cheaper and spurred the economy better than these bailouts!
ReplyDeletePiker, 401k wouldn't be affected by a corporation going bankrupt. Perhaps the company match would, but that is a benefit the company extends to attact employees anyway.
ReplyDeleteExactly which union(s) did Steve Jobs lure his employees away from?
I've never belonged to a Union, and the Companies I have worked for aren't Union shops. Yet my wages have gone up dramatically. How is that possible?
I guess I overreached a little with the Steve Jobs/Union connection there. It would be apropos if the automakers took Cringely's advice though!
ReplyDeleteI'm not thrilled with the excesses of labor unions either. It would be better if there was no use for them, because that kind of power concentrated in a small enough area leads to corruption, as sure as it does with the CEOs they oppose. Collective bargaining still serves a purpose though, so unions are for now a necessary evil.