2008/12/21

The automobile companies bailout and the long-ignored economic reality

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There's some right-wing talk about how unions were responsible for the high costs of the big three automobile companies in the USA.

Well, it looks to me as if the automobile companies (that seem to deserve a reputation for being unable to learn or even predict properly) simply moved their costs into the future during the 70's, 80's and 90's.
There would be ZERO costs for pensioned workers today if these costs had been paid in a proper fund model at the same time when said worker gave their work force to the automobile companies.

Instead, the Big 3 did what governments do; they accumulated obligations instead of spending the true price immediately.

(Maybe that the unions bear responsibility due to the volume, but honestly; it takes an asymmetry in power that favors the employees to make such past deals unfair.
A power asymmetry that favors employees over their employer is about as common in reality as companies' recruiters visiting unemployed workers for a job interview to beg for them to join the company.)

The same self-inflicted slow poisoning that happened to the Big 3 will happen to the U.S. government as a whole in a few decades unless its obligations will be de-valued (and effectively a huge portion of the citizens be robbed).

There are many problems in many Western societies like public debt, public long-term obligations (pensions and other), bad economy structures, unsustainable trade balances, inefficient political processes, unsustainable non-renewable resource consumption, neglect of lower class youths and excessive consumption and service expectations of citizens.

Meanwhile, some people still fantasize about future 'necessary' military spending and grandiose R&D + procurement programs.
The detachment from reality will likely last for at least another year, and some people will never catch up with reality.

Many Western states need to reform themselves a lot, even need to rebuild their industrial base and re-orient their economy. Any avoidable military expenditures needs to be avoided - and the expectations in military affairs need to be tuned down to proper alliance self-defence and participation in explicitly U.N.-authorized defense of nations.

Military expenditures are pure consumption in macroeconomics - mostly useless for the economic development. Their only unquestionable utility lies in national security. There's rarely any convincing utility beyond that.
You don't need to have almost half of the world military spending (purchasing power parity) for your national security if you're in the most powerful alliance ever.

Dipl.-Ök. Sven Ortmann

5 comments:

  1. The Diplom-Ökonom is a joke, correct?

    Or maybe not, life in the ivory towers of academia might explain a lot about your reasoning.

    You will find it doesn't often apply to the real world, outside of your nice sanitary economic modules.

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  2. Such a 'despise all experts' attempt might be an interesting attempt of attacking the credibility of the messenger, but fails entirely because I don't work as economic scientist.

    An attack on the credibility of a messenger is no respectable method of critique or or discussion anyway.

    You should at least attempt to face the content - or else you just waste your time with pointless personal attacks.

    By the way; I will delete all anonymous comments that have the same tone in the future.

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  3. The unions are not responsible if you count the Big Three being so foolish as to meet their demands. No matter to me if they are or aren't at fault, as long as I don't have to support the management or workers of these dinos.

    Having had a chance to work with GM and the ungrateful, lazy and ignorant bastards who make up the UAW I can tell you that it's not my fault if they were promised unicorns and magic carpets upon retirement. They've already got a lot more then they ever had coming and GM in particular needs to go away like buggy whip manufacturers.. and take the UAW with it.

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  4. As I see it, you aren't just the messenger, you are the author, those are your ideas.
    And your theories fail, because your "economic reality" isn't. Reality.

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  5. public debt = reality

    public long-term obligations (pensions and other) = reality

    "bad economy structures"
    example USA:
    GDP - composition by sector:
    industry: 19.8% (2007 est.)
    data from CIA World Factbook
    coupled with
    a monthly trade balance deficit of around $ 50-60 billion.
    That's a bad economic structure, an insufficient industry to earn enough to sustain the national consumption.
    UK is similar.
    Other example: Germany
    Exports have a volume of 40% of GNP and the account balance is strongly positive. This is extremely risky and unsustainable (and even kind of unlawful here). The trade surplus is the other side of the coin of others' trade balance deficits - and therefore systematically linked to economic problems elsewhere.

    "unsustainable trade balances" =
    reality, already mentioned here and in previous blog posts. "unsustainable" is points at the relevance of the problem, every non-balanced trade balance is theoretically unsustainable. That becomes a practical problem when the deficit or surplus is large and monotonous.

    "inefficient political processes"
    That's obviously a political opinion, but it seems to me as if the permanent substandard political culture of Italy and Greece as well as political lags in addressing problems and many other problems are a good foundation for such an assertion.

    "unsustainable non-renewable resource consumption" = reality

    "neglect of lower class youths" = reality. All studies for all nations show that lower class youths have very inferior chances in our societies.

    "excessive consumption and service expectations of citizens"
    That's a political opinion, but it's well-founded on the amount of lobbying, discussions about pensions, the frequent expectation of additional government services and the living-beyond-one's-means as indicated by private debt.

    - - - - - - - - - - - - - -

    See - it's cheap and easy to comment a blog and simply say "wrong" or to attack the author.
    Readers won't get much respect for such behavior unless it's coupled with actual arguments.

    Personal attacks and unspecified negation - that are pretty much cheap universal reactions of 'some' people whenever something doesn't please them (and when the boss isn't nearby - I've never seen any of them demonstrate courage - right, Mr. Anonymous?). Almost nobody takes such behavior seriously.
    Some (usually right-wing) parties exploit such behavior and run campaigns based on despising others and fear.
    Count that as another inefficient political process example.

    ReplyDelete