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Rolling Down the Negative Highway


It seems that blindness to unintended consequences is an essential political skill. The more an elected is able to ignore mistakes, the greater power accumulated. Attention to detail is passed down the line of staffers, who seemingly edit out the negs and contradictions as they create the executive summaries upon which our laws are argued and enacted.

The problem is not confined to left or right, but does seem to flourish the farther one stands from an individualist conception of economic society. The lefty/socialist/marxists philosophy rejects individualism. (In economics; sexual individualism they love)

A Wall Street Journal editorial on the current woes for carmakers mentions unintended consequences. Congress does not see regulations on automakers as a problem. Detroit just needs another handout:

For decades, Congress has never had a second thought as it imposed tighter emissions standards on GM, Ford and Chrysler, denouncing them for making evil SUVs. Yet now that the companies are bleeding cash, and may be heading for bankruptcy, suddenly the shrinking Big Three are the latest candidates for a taxpayer bailout. One $25 billion loan facility has already been signed into law, and Senator Debbie Stabenow (D., Mich.) wants another $25 billion, this time with no strings attached.

The financial panic has hit Detroit hard, but its problems go back decades and are far deeper than reduced access to credit among car buyers.

A bailout might avoid any near-term bankruptcy filing, but it won't address Detroit's fundamental problems of making cars that Americans won't buy and labor contracts that are too rich and inflexible to make them competitive. As Paul Ingrassia notes nearby, Detroit's costs are far too high for their market share. While GM has spent billions of dollars on labor buyouts in recent years, they are still forced by federal mileage standards to churn out small cars that make little or no profit at plants organized by the United Auto Workers.

Rest assured that the politicians don't want to do a thing about those labor contracts or mileage standards.

The losses among the big three have been large enough long enough to be something more than a temporary adjustment. Detroit is not building what people want at a price buyers are willing to pay. Both the product mix and the unit cost are strongly influenced by regulation.

Corporate Average Fuel Economy (CAFE) required discounting the price of tiny rolling sewing machines to offset the profitable, low MPG SUVs folks loved buying over the past decade. Safety mandates add a couple of thousand to the price of every vehicle. And higher price means lower volume. Increasing safety is not zero cost.

In aggregate, the Big Three are destroying value. Bad management shouldn’t shoulder all the blame. We’ve seen several changes of management and ownership across the persistent failures in the industry. Are we to expect that the worst managers are drawn to Detroit? Such a streak of bad luck seems quite improbable. It's as if there’s a corporate environment of loss. They’re stuck building rolling stock for a “negative highway”.

Taking this down to an individual level, every auto worker is destroying something whenever they punch in. What they produce isn’t worth what they’re putting in to it. Applying the marxist theory ofsurplus labor value, we’re destroying wealth. Instead of bailouts, a better course would be to free those workers from a slow suicide. Let them shift their labor to building stuff people want.

Maybe we just do not need to build so many autos each year. They’re better and more durable, and the annual improvements (other than styling) represent ever-smaller increases in utility. Radial tires were a bigger jump than adding a ninth cupholder.

If the aggregate social restructuring represented by making fewer vehicles is too scary, at least allow auto makers more flexibility in features and performance. Reduce the regulations, thereby reducing the hidden cost, and perhaps the end price will drop. Handing a new set of managers a fresh pile of cash has been proven inadequate enough times. Let the taxpayers keep their money. Let’s try giving the automakers more freedom to meet genuine demands. We’ve followed a path of meddling technocracy for decades. Isn’t it time for a change?