Class Warfare Blog

May 20, 2017

An Argument for a Minimum Wage

There have been myriad studies about the impact of having a minimum wage. Some indicate that there is no particularly strong linkage between creating a higher wage for low wage workers and some indicate that a rise in the min wage causes unemployment.

The politicians arguing against a min wage use a very simplified argument: namely that if employers have to pay their workers more, they will only be able to hire so many workers, mostly fewer. This is way too simple in thinking this. For one, if people are paid more money, they then spend more money (what goes around, comes around) which is good for business. There are many more facets to this issue.

If labor costs go up, and they have myriad times due to labor contracts, etc. how, oh how, do companies cope? (Yes, I am being sarcastic.) The amount of money that goes to labor in any company is not a fixed amount or even a fixed percentage of the company’s budget. There are many, many ways that those increased labor costs can be offset. For one, you can raise prices for the goods created. You could decrease profits. You could find other ways to reduce operating costs (reduce energy costs by going solar, etc.).

Knee jerk responses to these actions abound, of course. “If we raise prices, we will reduce sales!” Really? Companies never raise prices, then? C’mon, get real. Just raising prices alone, of course, is the lazy way to deal with increased labor costs; a combination of actions would be better.

Most of these minimum wage discussions are shallow and politically motivated. Basically, the opponents of min wage increases give minimal arguments and only add to them if we don’t accept (aka we reject vehemently) their overly simplistic argument.

Let me explain a real reason for min wage increases. Minimum wage increases are justified for the simple reason is that business interests (aka the plutocrats) have conspired to suppress wages for a long, long time. This involves bribing politicians to undermine union powers and privileges, delaying minimum wage increases, changing the laws in favor of employers over employees, etc. They have been particularly effective over the past 40 years (see the chart below as to the effectiveness of wage suppression over the past 40 years). The only power source of ordinary people to oppose these powerful business interests is government. The cabal wants wages low (too low) and so government must set a floor on wages. It is not simple but at least that is the political dynamic.

If you want to see this playing out right now, consider the current stance of the GOP. The GOP has been the champion of local rights for a long time. Education, for example, should not be a federal issue, but should reside in the states, with the states deferring to local communities and their school boards. So, what has been the GOP response to cities who have enacted their own min wage increases? GOP dominated states are passing laws to roll back those democratically achieved minimum wage increases and to bar such local increases in the future. Local control doesn’t mean a fig when the GOP’s paymasters issue directives (You will keep wages down, or else).

May 15, 2017

Economists Fail and Fail and Fail …

I could envision a role for economists in modern society except they continue to be willfully blind. They are blind because they have their heads so far up their asses.

Follow me now. Before the Great Depression, economists were only interested in small economic exchanges. But the misery of the Great Depression created the impetus to look at the economies of entire countries, even regions. Macroeconomics was born. (The goal was to prevent depressions, even recessions from ever occurring again.)

Like the “old” economics, microeconomics, certain simplifying assumptions had to be made and like the old economics, the simplifying assumptions lead to completely false conclusions. In microeconomics we ended up with the philosophy that markets were self-correcting and created an optimal economic situation. This dogma is, in truth, a piece of wishful thinking on the part of these academics. They wanted something that seemed directed at keeping the fairy systems they created balanced and whole. This belief that markets are benign and create a natural equilibrium inside of a larger economy still exists today as a political goal of those profiting from that mistaken assumption.

Macroeconomics, not to be out done, also had to make some “simplifying assumptions,” in its quest to understand how to prevent events like large recessions and depressions. In order to make things “doable” they decided to include the role banks play in our national economy but leave out finance. For reasons strange to a casual observer to understand, they also decided to leave out private debt. So, what has been the role of finance in the last 40-50 years in the U.S.? It has been to “financialize” the economy to the point that Wall Street doesn’t serve businesses in the manner you learned in school (by providing capital for businesses to modernize, expand, etc.) but now businesses exist to serve Wall Street. The money generated through finance has created a class of oligarchs who have captured the mechanisms of government and are now running it for their own benefit. They went on to shift governmental burdens off of businesses and onto private citizens, so that private debt has ballooned mightily, leaving citizens with little to buy anything with after ordinary expenses and debt service.

And what do economists have to say? “Move along, nothing to see here,” like all good Stormtroopers. One has to wonder whether the rich of a hundred years ago, having taken such a financial beating in the Great Depression, didn’t guide the creation of modern economic theory as a way for them to get back to the top and stay there. And this time, they are serious about hanging on, no matter what it does to you, me, or the country as a whole.

May 5, 2017

Egad, Economic Uncertainty is Real!

During the recent Democratic administration, Republicans often ranted about “uncertainty” with regard to investment. You see, the economy tanked in 2008 and the recovery was feeble (still is). Banks were given huge amounts of money at zero interest with the hope they would loan that money, cheaply but profitably, to businesses looking to expand. The key word was “hope” in that the government attached no strings to those zero interest loans. Consequently the banks bought securities with the money, causing the stock market to “recover” rapidly but no one else. When upbraided about this anti-social behavior, the Republicans countered with there was “too much uncertainty” in the market for business to expand. They rather should have stated there is too much bullshit in politics; that would have been closer to the truth.

The real reason businesses did not expand with all that cheap money around, is that they possessed even cheaper money (U.S. businesses had $2+ trillion dollars in cash reserves at one point.) and they weren’t spending that either. The reason? Simple: no demand. This is shockingly self-evident for people who know nothing about economics other than “supply and demand.” If there is no demand, supply is irrelevant (even though some economists tried to claim the opposite—see Say’s law). There was no demand because those business’s customers were broke, still are.

So, when Mr. Trump was elected and the GOP captured both houses of Congress, well … “Happy days are here again, the skies …” uh, no? No. Even though gasoline is quite cheap now, no one is buying much. Retail business are offering lower and lower pricing and still no surge in buying.

People are sitting on the sidelines economically because, well, they are uncertain about the future. When a person’s future is potentially very bad, they hunker down, save their money, and prepare for the worst the best they can.

Mr. Trump’s policies have never been particularly coherent, which was by design. When Mr. Trump claimed he was going to deport 11 million “illegals” from the country, many people translated that into “I will have more job opportunities.” (Right, by picking crops and doing day labor out of the local Wal-Mart?) When Mr. Trump claimed that he was going to transform Obamacare into something better, people applied their own definitions of what “better” meant. But healthcare is a complicated subject (“Who knew?”) and Mr. Trump’s party’s first effort at it was horrifically negative. (Hunker, hunker, hunker,…) Then there was the “tax reform” promised. People thought “my taxes will go down” and “I could use the money.” What they didn’t think of was that rich people’s taxes would go down much more, thus reducing government tax receipts, causing many government programs to be terminated, government programs that ordinary citizens are dependent upon, of course, not the rich. (Hunker, hunker, hunker,…) Then the current administration launches missiles in Syria and threatens nuclear war in North Korea. (Hunker, hunker, hunker,…) and….

The economic uncertainty of businesses as a reason for why they weren’t investing in their own businesses was pure political spin. They were anything but uncertain, in fact they were absolutely sure there was no demand, so no expansions. But the economic uncertainty of individual citizens is palpably real. We are not spending much money right now because we don’t know whether we will have affordable healthcare available, whether Social Security will still exist, or Medicare … all of these have been threatened by the GOP.

All of these threats are coming home to roost. We are in line for another recession, possibly as early as this summer. The ordinary tools used to combat recessions are not available (cut interest rates … why? … how?) and the GOP is dead set against deficit spending (the tool that really works) unless it enriches the rich or the military industrial complex.

Buckle your seat belts, folks. If you think things are uncertain right now, well, winter is coming.

April 25, 2017

They Are Just Better Than Us … and Getting Betterer

Filed under: Economics,Morality — Steve Ruis @ 10:40 am
Tags: , , ,

Notes on How the Class War is Going (Hint: You Are Losing Worse, Much Worse.)

According to an article in Bloomberg News: “… the poorest fifth of 50-year-old American men can now expect to live just past 76, six months shy of the previous generation. The richest 50-year-olds should make it almost to 89, seven years longer than their parents’ generation.

The richest people in the U.S. aren’t just getting several years of extra life, they’re also reaping a financial reward for their longevity – courtesy of the U.S. taxpayer. These trends will be crucial as the new administration and Congress consider any changes to Social Security, Medicare, and other programs. Even tweaks to these programs, from the retirement age to benefit formulas, could affect the rich and poor very differently.

Three decades ago, the richest and poorest retirees could expect about the same amount of benefits out of government programs. The richest generally got larger Social Security payouts, both by qualifying for higher checks and by living longer. The poorest got more out of other programs, such as Medicaid and Social Security disability insurance. Medicare offered about the same benefits to rich and poor.

If you believe that “things just keep getting better,” as I used to, I think you have to expand your thinking to see for whom they are getting better and for whom they are getting betterer, much betterer.

And if you think this is happening by accident, think again. Consider just the attempt to raise the retirement age of Social Security to the age of 70. This would reduce the average number of years of payout for that lower cohort to six years (zero if you are Black) but wouldn’t negatively affect the richer cohort much at all. But it would forestall the most commonsense argument: removing the cap on Social Security wages, currently at $127K and change. So, if you make millions of dollars, you pay SS tax on the first $127K and then nothing on the rest. Removing that cap would dip significantly into the pockets of the rich, something making foregoing five years of SS income pale in comparison. This is why the rich want that solution (age 70 for benefits) rather than the cap removal. So, now you know why such a poor solution to any SS problem gets so much ink. (They own the news media, too, don’t you know.)

If you don’t believe there is a class war going on, it doesn’t matter, you are still losing.

April 23, 2017

There is No Real Anti-Science Movement

There was a March for Science across this country yesterday. It did not draw huge crowds but the participants were enthusiastic. Unfortunately, many of the participants seem to be close to declaring that there is a war on science or some other foolishness. There is not.

To show you this, consider the staunchest climate change denier. If they went to the doctor and were diagnosed with a serious disease and were offered a treatment produced by the finest medical science in the world, do you honestly think they would say “Science? I want none of that. Send for an exorcist.”?

A climate change denying businessman looking to upgrade his IT infrastructure looks at the proposals and decides “We want none of this ‘high tech nonsense,’ we want biblically-inspired computers.” Whadya think?

Photo by Jessica Kourkounis/Getty Images

The opposition to climate change is there because of economic interests that fear that taking it seriously will crimp their ability to make money. All of those politicians who say “the jury is not yet in on climate change” have no idea whether it is or it isn’t, but they are being paid to say it is not. The order President Trump made to have NASA stop studying the climate is not fueled by some “science is a waste of time and money” attitude on the part of the President. His party is being paid to do this.

Similarly, there is no scientific controversy over the Theory of Evolution. It is an established scientific paradigm. The religious have no problem with the theory (actually very few of them seem to even understand the basics); they have a problem with its findings. If the theory of evolution is true, then any creation story that contradicts it is false and, if you are from a religion that paints the Bible as being ultimate truth, you have a problem. The same thing goes for those religiously-minded who claim the earth is only 6000-8000 years old. To believe the scientific findings (the Earth is over 4,000,000,000 years old) is to toss one’s religion’s creation stories in the trash can and the beginning of “if the Bible got that wrong, what else does it get wrong?”

Science is all about living with doubt. Politics and religion are all about being absolutely sure you are right. Hence the conflict.

But do realize, it is the scientific results these people have a problem with, very specific results. On one hand, unborn children’s lives are sacred and on the other the Mother of All Bombs is a really cool outcome of war science. It is not “science” they question, only when science tells a narrative counter to one they cherish that they “oppose the science.” And since they can’t be bothered to learn the science to try to counter it (probably a futile effort anyway), they disparage it emotionally (I ain’t no kin to no monkey!) and politically (it is too expensive to invest a huge amount of money in uncertain science).

Targeted opposition to specific scientific findings is, however, feeding an anti-science attitude among those who do not want to get involved enough to see for themselves. I can’t see how this is helpful.

But, then, these are the same people who promoted an anti-government attitude (The government is tyrannical!) before they decided to run the government for their own benefit. I do not think they even bother thinking about the long term effects of their actions. There is too much money to be made in the short-term.

April 22, 2017

Through a Glass Darkly, Dirty and Distorted, Too

We are treated with a view of education from the privatizing crowd that is bizarre. They see a child sitting in front of a computer, learning their ABC’s and whatnot. They see robotic teachers teaching from scripts and then subjecting their charges to standardized tests. They see, well, profits mostly.

I am not as concerned that these people see this as “a good idea,” but that others, not “on the take” as it were, agree.

What this whole approach misses is that education is a social process. It doesn’t take place in a closet, but in a crowd. We do, though, have societal icons; one is of the lone wolf academic who studies on his/her own and does great things, such as portrayed in the movie “Good Will Hunting.” Because these are themes we enjoy seeing and hearing about (a little like winning the lottery: if it could happen to them, it might happen to me!), we see and hear about them a great deal (the lone scientist, the lone crime investigator, etc. against all odds blah, blah, blah). But they are not the norm.

Currently scientists are seeing that we tend to think better in groups, that no individual has all of the puzzle pieces but in communication with others, clusters of puzzle pieces get formed, and then clusters combine to make larger clusters.

It is not an accident that communication is a cornerstone of the scientific method. No, not the method that you were taught in school, that was a convenient fiction. You have to look between the lines. Just one person doesn’t have access to all of the facts. They also don’t have access to all of the imagination. Who creates the hypotheses, just individuals? And who creates the theories? Creationists seem to think Darwin created the entire theory of evolution. The truth of the matter is Darwin created a structural framework, that literally thousands and thousands of scientists have built, rebuilt and filled in. There are so many fingerprints on the theory of evolution now, that saying “Darwin was wrong” is irrelevant. The portion of the theory of evolution that is Darwin’s is but a small part of the whole now.

Education is not limited to human beings, but it is a social activity. While “students” can go away for a time and in solitude, consult educational technology (the most successful ed-tech so far is something called “books”), they must come back and interact with other human beings to clarify understandings, compare opinions, and justify arguments. Students are learning how to learn and participate and think in groups. They learn to write so other humans, not in their locality in either space and time, will understand them.

The problem with the voucher faddists, the charter school purveyors, and the ed-tech peddlers is that they think education is something that can be analyzed using a spreadsheet, with the most important column being “profit.” If you compare their approach with what is being done in, say, Finland, you will see what is wrong. In Finland, they are working to improve the ability of teachers and students to interact as directly as possible. Their classrooms have almost no “tech” in them. Children get out and play between classes because play is important, it is important to learning how to work with other human beings.

Everybody I know went to school. If they think about it for just a minute, they will recognize what I claim above is true. Which makes it even more shocking that so many of these “reforms” are being supported around the country. Are we that venal? Or are we that distracted (Oh, Facebook!)?

I do not know about you, but I have just deleted my Facebook account. The reason? No social ROI, just distraction, distraction, distraction.

April 12, 2017

That Light at the End of the Tunnel …

Filed under: Economics — Steve Ruis @ 8:15 am
Tags: ,

…  is either a bit of light in the darkness … or an oncoming train. There is a glimmer of hope for the former over the latter. I strongly recommend the following: Finally, a Breakthrough Alternative to Growth Economics

 

 

March 13, 2017

We Have Met the Enemy … and It Isn’t Us

We have met the enemy and it is … our corporations. Consider first a couple of examples:

You have heard, I am sure, of the so-called “skills gap,” which is that American workers just do not have the skills needed for “today’s marketplace,” so we need to issue more foreign worker visas to fill the necessary jobs. One of the fields clamoring for more of these visas has been Information Technology (IT). IBM, a quintessential American IT company, hid the facts for many years but now it is clear. Between 2003 and 2010, IBM fired so many American IT professionals and hired so many engineers and computer programmers in India that the workforce of IBM India is now larger than that of IBM USA. IBM India had a mere 6,000 workers in 2003 but by 2010 had somewhere in the range of 100,000-130,000 workers. How did IBM manage this into the teeth of the worst global recession ever? It did it by firing over 30,000 workers here in the U.S.

IBM calls this “cross border job shifting,” which sounds ever so much more like a transfer than people getting fired here and others getting hired there. And IBM is not alone in doing this, so how can there be a shortage of IT workers in the US when there are so many Americans who used to hold the very same jobs that are claimed are “going wanting?” What is the real rationale for the demand to be issuing more visas for foreign workers? There is no shortage of highly qualified IT workers. This is simply a classic wage-suppression tactic. Bring in foreign workers and pay them less than you would American workers with the same qualifications. This makes it very much harder for Americans to get wage increases here and also harder to form unions that would look into such practices. Foreign workers do not want to anger their employers because if they lose their job, they lose their job sponsor, and it is back to India for them. They will not join a union, period.

Now, consider another quintessential American company, Ford. Can there be a more American story involving business that the creation of the Ford Motor Company from scratch? But in the late 1990’s, Alex Trotman, Ford’s then CEO, admitted “Ford isn’t even an American company, strictly speaking; we’re global.”

And if American companies like these do not consider themselves “American companies,” how much can we expect them to act on our behalf? When I was a young man, many corporations had multiple stakeholders. These corporations considered their customers to be one, along with their workers as another, and their communities, too. And, of course, also their shareholders. Modern business practices, spurred along by quack economists like Milton Friedman, had reduced the number of corporate stakeholders to one: the shareholders. Well, just one stakeholder if you do not count the executive’s self-interest in their own remuneration, which has skyrocketed while worker wages have been experiencing trickle-up growth.

As a union officer in the 1980’s and 90’s I participated in an experiment with management of our enterprise ($150 million annual budget) on creating a more cooperative governance structure. Part of that effort was coming to an understanding of relationships between and among the two groups. One facet of that learning was that “workers” (we all worked for the company) we all tended to imbue our work relationship with trust, that is we put our trust into our employer to some extent. This was not earned trust but, basically, we trusted our employer because we wanted to have a job in which we could trust our employer. This wishful thinking trust usually had no repercussions, but when something happen that a worker or workers did not like, they felt betrayed by someone they had trusted (trusted to do what was never specific, usually it was “the right thing”). Such “betrayals” existed in collective memory for decades. (I know this as when I was hired into this company I heard “stories” from other employees. I found out later that some of them were almost 30 years old.)

We are making that mistake now. We are told by representatives of these “American companies” that we should “trust the marketplace” and “trust them.” But their actions indicate that not only are they untrustworthy but they are not even American companies. Imagine how you would feel if a foreign company, say from China, wanted to come into your community and build a plant, one with a bit of pollution associated with it. Then think how you would view that intention were is an American company? Would your response be the same? Yet, these American companies no longer consider themselves to be American, and have acted accordingly for decades now, but we still “trust” them more than we do others.

These companies have no issue with firing you and hiring a replacement from overseas and ask you to train your cheaper replacement (happens all the time, happened to my ex-wife). These companies have no problem with going through bankruptcy to eliminate their obligation to pay into their worker’s pensions. These companies have no problem with manipulating our tax laws so that they pay no taxes, with the burden to make up the difference shifted to you and me. These companies have no problem in bribing our public officials to do their bidding instead of the people’s. And if you want to know why our recovery from the Mother of all Recessions was so weak, with employment struggling to get back to anything approximating normal, realize that business leaders see every crisis as an opportunity and in this crisis they used the opportunity to outsource even more jobs. They were hiring, just not in the U.S. That is how much loyalty they have to their bottom line and how much they have to you and me.

Ironically, we have just elected a corporate businessman President to fix this mess (drain the swamp). If this were not so ironic, so funny, I would be crying. When are we going to wake up? When are we going to invest our passion and our votes in organizations, like labor unions, that have proven track records for countering these un-American corporate interests?

Wake up people! It is very close to “too late.”

March 3, 2017

The Utter Failure of Economics and Politics to Prevent the Ravaging of the Rich

I ran across this rather incredible graph recently:

20-year-annualized-productivty-growth-in-the-uk

The data are from the UK so I looked to see if I could find any similarities to data from the US, and yes, they are there.

The graph shows the growth of worker productivity from the years 1800 to 2010. Since all of the values are positive, productivity has trended upward in general. But you can see four distinct trends on this graph: first there is a strong increase in productivity from 1800 to about 1870, then a general decline in the rate from 1870 to about 1900 (while still being positive, the amount of increase dropped period by period). Then there is another long period of productivity increase improvements from roughly 1900 to the mid 1970’s, followed by another decline in the rate of increase from 1970’s to the present.

What do these periods in which productivity changes steadily decline in magnitude correlate with? Ah, the period 1870-1900 is often referred to as the “Gilded Age.” And the mid-1970’s to the present started with Reganism/Thatcherism and is the second great period of wealth transference to the few in this entire time period.

We have been told over and over that the accumulation of wealth by the few in our society is a good thing. The wealthy are the “job creators,” the movers and shakers who get things done. But the reality is exactly the opposite. The people who have been telling us that wealth inequality is a standard feature of capitalism and a “good thing” are just the PR men for the wealthy, trying to avoid pitchforks and torches showing up in the gated communities of their rich paymasters. That so many of these flacks are economists should be appalling to the intellectual community. (Maybe we should disbar them and transfer academic economic departments to become part of the marketing programs of schools of business.)

All of the data show that periods of extreme wealth accumulation by the few devastate economies instead of facilitating them. The steepest upward portion of this graph takes place between the end of World War 2 and the arrival of Reganism/Thatcherism and anti-unionism. Productivity grows the fastest when the wealth is shared more fairly.

Please note that there were rich people during this post-war period. There were many people getting rich for the first time. They weren’t, however, getting filthy rich by distorting the political systems in their favor. Becoming rich through your own skills is one thing. Becoming obscenely rich by hook or crook, though, hurts all of us.

February 23, 2017

Why Do Conservatives Want to “Let the Markets Rule?”

It is axiomatic that conservatives want there to be as little government regulation of economic markets as possible, because they claim that “the Invisible Hand of the Marketplace (Adam Smith)” guarantees the best possible outcome and the more we interfere with that, the poorer the outcome will be.

Conservatives say this as if it were a fundamental truth of economics.

Recently a prominent economist died (Kenneth Arrow) and his work is often held up as part of said proof of the infallibility of markets. As the obituary writer put it “Professor Arrow proved that their system of equations mathematically cohere: prices exist that bring all markets into simultaneous equilibrium (whereby every item produced at the equilibrium price would be voluntarily purchased). And market competition puts society’s resources to good use: Competitive markets are efficient, in the language of economists.” (Amen!)

But to prove that particular economic theorem a certain number of “assumptions” had to be made. Here are some of those:
•  all markets are perfectly competitive (all buyers and sellers have perfect information, no buyer or seller is big enough to influence prices)
•  markets in different locations are different/separate markets (so the market for milk in California doesn’t affect the market for milk in Illinois)
•  all markets contain “forward markets” as futures markets in which you can contract to buy anything, for example pork bellies (to make bacon, we hope), for any future year … forever
•  plus, of course, everyone has perfect foreknowledge of those futures markets, too.

This work is considered foundational in economics, earning the authors Nobel Prizes, etc.

Now, what that work actually proves is exactly the opposite of what is claimed. The work shows that markets are perfect and benefit society only with those pre-conditions. Of course, no such markets exist or can exist with those elements in play. What they proved was that the conditions for the trust people place in markets to “do the right thing” are only available in Never-Never Land.

Think about it. If one had perfect information of the future of the prices of pork bellies or any other commodity, why would trades be made? Currently, futures buyers buy future goods because of price uncertainty. The thinking is “I am going to buy now when the price is reasonable because I think the price is going to go up.” You certainly wouldn’t “buy now” if you knew the price was going to go down. And why would a seller sell to you at the current low price if he knew he could get a higher price by just waiting?

All of these assumptions are bogus. You cannot say that the local market for celery in California is unconnected with the local market for celery in Illinois when virtually all of the celery in the U.S. is grown in California. Similarly (and if you hadn’t been around for the past 50 years or so) we couldn’t get tomatoes or fresh fruit in the winter months (or lettuce, etc.) and we made do with substitutes (cabbage for lettuce, etc.) until the fresh, local harvest came in. Now, all winter long we get produce from Mexico, Peru, Southeast Asia, etc. We can have tomatoes and lettuce all winter long. Many of these markets are global making them most definitely not local.

And, then we have advertising to make sure that seller and buyer do not have the same information. (If you think advertisers are trying to share information, wake up!) And so, in no market is there “perfect information” for both buyer and seller.

So, getting back to the original question: why do conservatives want to “let the markets rule?” They actually do not want this. What they want is minimal or, better, no regulation of what they are allowed to do to make money. The “free markets” economics is just a smokescreen for “Do not tell me what I can do!” Further proof of this is the fact that these same people are trying to get advantages for their business written into law: tax breaks, labor favors (labor unions are disadvantaged in “right to work” states), and if they can pull it off: monopolies. Of course, these people say “competition is good,” but basically they want none of it.

If you want a case history of this in action, look at the U.S. automobile industry over the last 50 years or so (post WW2). At the beginning of that period the U.S. car market was dominated by Detroit Iron, mostly in the form of huge, heavy vehicles that got very poor gas mileage (even into the single digits of mpg). Foreign imports began to trickle in in the form of small, gas thrifty cars like the Volkswagen of Germany and Japanese imports (Honda, Subaru, Suzuki, etc.). The major U.S. manufacturers looked down their noses at these vehicles: they were small, had little power, and even less chrome details. But then there were the gas crises of the early 1970’s. All of a sudden, having a gas thrifty car was quite desirable. Sales of “imports” skyrocketed and American manufacturers started bringing out “economy models” to compete. But if “competition was good” Detroit was having none of it. It sought and got protection from the federal government which limited the numbers of cars that could be imported. Japan, previously content to be sending smaller, cheaper cars to the U.S. saw an opportunity. If it could import only so many cars, those cars should provide more profit than the small economy models, so they started importing higher end vehicles (still not luxury models, like the Lexus, but higher end vehicles). These vehicles were much better made that U.S. vehicles and offered much better gas mileage, too, so people snapped them up in droves. Having their numbers restricted also drove up prices because there were only so many around. (This resulted in the cars available being snapped up close to ports of entry, so people in Middle America didn’t notice this at first, but the coasts were bristling with imports.

So, the reaction of Detroit? Going back to Congress and asking for more protection.

At the same time, automotive safety standards were being introduced at the federal level. I remember watching the hearings regarding having a “5 mph bumper.” Detroit’s “Big Three” auto makers said such a requirement (that a car would survive a 5 mph collision with little or no damage—5 mph is a brisk walking speed) would bankrupt them. All of these manufacturers supported this claim. Then a witness, a “shade tree mechanic,” testified that he had a 5 mph bumper, all tested, and available for license that he had made that cost just about the same as what Detroit was paying for bumpers then. These whinging, uncooperative titans of industry certainly lost credibility in front of Congress, which hurt their efforts to get protection from their competition.

So, these claims of markets and competition are “good” are just smokescreens for what they really want: a guaranteed path to make as much money as they wanted to with no interference, certainly not regulations on fuel economy or safety. They preferred to compete on the basis of which cars had the most shiny bits, so as to impress your neighbors when the car sat in the driveway.

Granted, there are some conservatives who probably believe the economic BS (they aren’t a particularly bright group) but that doesn’t make their beliefs true. The real problem is the public has been brought to a similar belief because of the repetition of the false claims over and over and over. I used to carry a spray can of bullshit repellent for just such utterances, maybe I should produce those for sale. The market should be strong.

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