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[BLOG] Cars and Class Warfare
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Author Topic: [BLOG] Cars and Class Warfare  (Read 25049 times)
Current
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« Reply #15 on: December 14, 2008, 10:37:48 EST »

Quote from: Ihlosi
Well, Toyota isn't saddled with all the obligations (pension plans and such) that GM is.
What does that have to do with anything?

It's a big chunk of the problem. Toyota can be more profitable since they don't have to deal with a constant drain on their cash.
I fail to see your point.  Toyota don't have these costs, so what?  The US automakers do have them.

Quote
You don't need to solve these problems, bankruptcy will solve them.  Whoever can make use of the capital will buy it, history demonstrates that.

Well, yes. Even if that means tearing down all the factories, using the land for parking spaces or landfills (Hey, if you got the whole thing for $10 ...). I personally have to deal with this kind of "lack of solution" every morning, since part of the building I work in is now used by a "logistics" company (it used to belong to HP) and having to use a major truck route to get to the parking spaces is no fun at best (and dangerous at worst, we've had numerous accidents already with trucks backing into cars and such).

But yeah, it's some kind of solution to the "vacant office building" problem.
That's hardly a lack of solution.  You have just demonstrated that the assets are being reused.  Certainly all assets of this sort can't be reused, some factories will inevitably be torn down.  This is far better though then operating those assets at a loss.  Operating them at a loss means that other members of the community would be paying for the asset to continue operating.  In that case in what way is it an asset at all?

You don't need to solve these problems, bankruptcy will solve them.  Whoever can make use of the capital will buy it, history demonstrates that.  If another company can use all of GM they will buy the whole company.  If not they will strip out the profitable parts.

...and in stripping out the "profitable parts," you'll scatter the work force, many of whom don't have transferable skills nor access the proper training to obtain similar employment - and even if they did, it would be difficult to find new employment when the trend is to fire and not hire. That's one of the major reasons people are resistant to allowing bankruptcy; regardless of whether the business "deserves to fail," the employees certainly don't deserve to have their livelihood endangered.
The employees have for some time worked for companies that they know are not stable.  They should have thought about this and prepared for it by finding work elsewhere or by saving for that eventuality.

Here's something I've been wondering:

Toyota auto workers are paid a little less hourly wage than UAW members. Yet Toyota managed to make a greater profit while GM lost millions in 2008, even though both companies sold about the same number of cars that year.

It seems to me that the big 3 here in the US don't know what they're doing. Wouldn't it make more sense to give ownership of Ford, GM and Chrysler to competent companies?

Wait... that's kind of moot now since the White House passed the bailout. Nice goin, Dubya. One more colossal fuck-up before you leave office. Have these last few months been Bush's efforts to get a jump start on the socialist program that we're soon going to experience?

So of the four companies, the one who receives government R&D grants from Japan is the one who's doing well, and this is your basis for saying that the government shouldn't get involved in the problem?
To a great extent the Japanese car companies succeed because they are supported by money from the Japanese taxpayer.  However, just because the Japanese are doing this doesn't mean that it is the clever thing to do, far from it.  The funds used to support the Japanese car companies are coming at the cost of Japanese consumers and businesses.

Think carefully about it.  Let's say we have industry X, that industry is subsidised by country A and by country B.  It is clearly in the interest of either of the two countries to stop the subsidy.  If, for example country A were to stop the subsidy then the other industries in their country will benefit and they would still be able to buy the subsidised good X from country B.


Regarding Heq's critique of fractional reserve banking and central banking...
It's a little more complex then that,

It's not only a little more complex than that - in any scenario where you're dealing with lending and completely forget to account for the debt, you'll end up "inflating the money supply". In the example you give, there's $344 in balance, but also $244 in debt. And there's only $100 that can actually be spent by someone.
Yes.  The other side of what Heq is talking about is money.  He concentrates on the debt production process, but this debt production process is, by it's nature, also a money production process.  Read the wikipedia articles on fractional reserve banking and fiat money.

Ihlosi, if only that were the case.

All the debt there exists in the bank, and in the form of taxes (kinda debt), and you presume people don't spend today what they owe tommorow.

This is one of the breakdowns in economics, the assumption of rationality.  People really suck at planning, really, really suck at it.
The frightening thing though is that it doesn't require any breakdown of rationality at all.  Ludvig Von Mises showed this almost a century ago.  At every step it is rational for those involved to play along.  The banks make more profit by fractional reserve banking.  The consumers get lower interest rates.  Governments get to charge lower taxes and spend more.  The downsides are the inflation it causes and the increased risk of systemic crisis like the current one.  However these costs are systemwide and in a fiat money system with central banking not concentrated on those who make the decisions.

This is one of the breakdowns in economics, the assumption of rationality.  People really suck at planning, really, really suck at it.
That's what I've been trying to tell Current for the last 30 years or so, judged my completely rational and accurate biological clock.

People are good about making rational decisions only if it is in the short term and emotional factors aren't prominent.  That can be simplified to people are not good at making rational decisions.
I don't think we really disagree so much.  You seemed to agree in our earlier conversations that the rules people use are accurate in most cases but break down in some particular cases.  That is hardly saying that people are "not good at making rational decisions".  I certainly am not claiming that people are perfectly rational.
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Bringerofpie
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« Reply #16 on: December 14, 2008, 10:44:59 EST »

Current, subsidies are not necessarily bad for the economy. Granted, things like agricultural subsidies that we have in the U.S. and EU are really horribly done, but they can actually be quite useful.
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« Reply #17 on: December 14, 2008, 10:50:07 EST »

Current, subsidies are not necessarily bad for the economy. Granted, things like agricultural subsidies that we have in the U.S. and EU are really horribly done, but they can actually be quite useful.
How?

The point is, if funding something is profitable then the private sector are likely to do it.  Only if public sector investors are better at finding profit opportunities can subsidies be useful.  And, why should public sector investors be able to do that?  Public sector investors are rewarded by votes not by profit, so they are motivated to do what will give them the most votes.
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Current
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« Reply #18 on: December 14, 2008, 11:24:10 EST »

Quote from: Manufacturing Dissent
So of the four companies, the one who receives government R&D grants from Japan is the one who's doing well, and this is your basis for saying that the government shouldn't get involved in the problem?
Don Boudreaux said about this, in a letter to the Wall Street Journal...

Quote from: Boudreaux
    Dear Editor:

    Even if Stephen Collins is correct that the yen is artificially undervalued, the title of his letter - "An Artificially Weak Yen Yields Subsidies for Japan" - is mistaken (Letters, Nov. 29).

    To keep the yen undervalued, Japan's government must accumulate massive foreign-exchange holdings.  Acquiring these dollars and other currencies requires the Japanese government to tax its citizens either directly or surreptitiously through inflation.  This policy harms rather than helps the Japanese people - hardly a subsidy "for Japan."

    And while some Japanese exporters might benefit from an undervalued yen, so, too, do American consumers.  We get automobiles and other Japanese-made products in exchange for oodles of tiny monochrome pictures of dead American statesmen.  Now that's a subsidy!

    Sincerely,
    Donald J. Boudreaux
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Psy
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« Reply #19 on: December 14, 2008, 12:07:54 EST »

The employees have for some time worked for companies that they know are not stable.  They should have thought about this and prepared for it by finding work elsewhere or by saving for that eventuality.

There is not much point in preparing, if the big three fall the US would fall into deep depression due to the huge sudden drop in consumption.
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Current
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« Reply #20 on: December 14, 2008, 12:14:12 EST »

Also, this Class warfare stuff is idiocy too...

Quote from: Liberal Seagull
While we're on the subject, I'm distressed at the level of classism that's hidden in this debate. One of the benefits being touted for bankruptcy is that it would allow GM to bust the United Auto Workers Union by eliminating its labor contracts. When insurer AIG was bailed out at a cost of more than twice what the auto industry is asking for, I don't recall anyone questioning what workers there earned; yet it's taken as given by everyone involved in this debate that auto factory workers are overpaid. We're apparently happy with white collar workers making whatever they can, but heaven forbid that a blue collar worker might make a middle class wage.
It is a matter of how they are getting it.  The UAW have a monopoly on labour to manufacture cars in Detroit.  This is why it's members earn more.  Now, I would argue that this is not much of an issue, since there is competition in other parts of the country.  However, many people (including most progressives) take a much harder line on supposed monopolies than I do.

Quote from: Liberal Seagull
The rhetoric we're seeing used against the middle and lower classes in this recession is really toxic. As Media Matters points out, the conservative media have blamed minorities and undocumented immigrants for the housing downturn,
No they aren't.  They are blaming loans to such groups.  Most of the attacks I've seen have being on Senator Barney Frank for passing regulations forcing banks to loan to high-risk borrowers.  This truly part of the problem, something the left must accept.

Quote from: Liberal Seagull
and union members for the auto industry's problems;
It is though a major part of the problem.  It is not inaccurate to say so.

Quote from: Liberal Seagull
groups that have little or no influence in the marketplace,
Little or no influence??  They are the groups most goods and services are made for, they have by far the most influence.

Quote from: Liberal Seagull
and have benefited little and suffered greatly in the last eight
That is rubbish.  Read the statistics.

The employees have for some time worked for companies that they know are not stable.  They should have thought about this and prepared for it by finding work elsewhere or by saving for that eventuality.

There is not much point in preparing, if the big three fall the US would fall into deep depression due to the huge sudden drop in consumption.
No it won't.  Auto workers are not really a large group.  Anyway, a fall in consumption is nothing more than a temporary risk to an economy.  In time capital equipment and staff will be employed in other industries.

You may not agree.  In the final analysis all I can say is, "watch what happens in the future".
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Psy
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« Reply #21 on: December 14, 2008, 12:56:29 EST »

The employees have for some time worked for companies that they know are not stable.  They should have thought about this and prepared for it by finding work elsewhere or by saving for that eventuality.

There is not much point in preparing, if the big three fall the US would fall into deep depression due to the huge sudden drop in consumption.
No it won't.  Auto workers are not really a large group.  Anyway, a fall in consumption is nothing more than a temporary risk to an economy.  In time capital equipment and staff will be employed in other industries.

You may not agree.  In the final analysis all I can say is, "watch what happens in the future".
You don't have a LTV understanding of the situation.  The American auto industry from a LTV perspective is makes up a large chunk of the US economy, the American auto industry consumes a large chunk of industrial goods and the auto workers and workers farther up the production stream consume a large chunk of consumer goods and significant chunk of global consumer production services these workers.  The global economy is already contracting as there is already rising underconsumption, encase you slept through the classical economic theory, underconsumption is when a lack of paying consumption causes a lack of industrial expansion which is suppose to mop up surplus value in the system.

There is also the Marxist crisis theory that comes to the same conclusion yet explains the problem differently (still within a LTV framework), basically that the rate of profit would take more of a hit when you take out that consumption and don't replace it and the global economy is already in contraction.

From the LTV point of view there is not problem with the UAW the other car manufactures has similar labor costs just elsewhere (for example in Japanese car manufactures have labor costs in R&D subsidies), also LTV shows low wages only benefit individual capitalists yet for overall health of capitalism high wages are better as it means higher commodity values and higher consumption of workers.
« Last Edit: December 14, 2008, 12:59:15 EST by Psy » Logged
Current
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« Reply #22 on: December 14, 2008, 13:06:31 EST »

Well, I understand what LTV implies in this situation.  However, I think LTV is rubbish, for reasons I have given many times before.
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Heq
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« Reply #23 on: December 14, 2008, 13:14:05 EST »

Current, the rational thing to say is the outsiders, if you care to whisper her name, Randian view of it.

It's kind of like what a collegue said recently about derivitive trading "You know, at some point, someone is going to realize there is nothing there, then these stocks are gonna Nortel" (for the non-canucks, Nortel was a futures stock masquerading as a tech stock with nothing behind it which lost near everything a short while back).  Once the government and the public starts dealing in non-stuffs, while presuming they are stuffs, there is always the danger the public will "wise up"

I, as a paranoid psychotic, do not believe the benefits of such a system outweigh the dangers within it.  Of course, those in government often don't see the big train a-coming (or, just as often, assume that they can dodge it when it hits), and those outside of government rely of the government to protect them from the smash and grab.

It's like a whole bunch of white frat boys wandering around Zimbabwe.  Without anyone keeping their eyes out for potential trouble, and each assured that someone else is keeping a look out, they are going to get boned, the only question is how long their luck holds.
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« Reply #24 on: December 14, 2008, 13:26:22 EST »

Well, I understand what LTV implies in this situation.  However, I think LTV is rubbish, for reasons I have given many times before.
LTV crisis theories have explained crises in capitalism pretty well.  Also if the capitalist markets can easily deal with falling consumption then why hasn't it fixed it yet?  This crisis dates back to last year and back to the 1970's if you include the bubbles as part of the current crisis.
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« Reply #25 on: December 14, 2008, 13:50:29 EST »

Heq, I agree with you.  In the end the Federal Reserve will inflate the currency so much that it will become worthless.  At that point the west will have to move back to sound money.

Well, I understand what LTV implies in this situation.  However, I think LTV is rubbish, for reasons I have given many times before.
LTV crisis theories have explained crises in capitalism pretty well.
No it doesn't.  There is no real evidence that the Marxist view of crises explains crises at all.  If you know of some then please point to it.

Also if the capitalist markets can easily deal with falling consumption then why hasn't it fixed it yet?  This crisis dates back to last year and back to the 1970's if you include the bubbles as part of the current crisis.
It is, as Heq mentions, the fault of the Federal Reserve.  Read a book on Austrian economics and all will become clear.
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Psy
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« Reply #26 on: December 14, 2008, 14:25:44 EST »

Well, I understand what LTV implies in this situation.  However, I think LTV is rubbish, for reasons I have given many times before.
LTV crisis theories have explained crises in capitalism pretty well.
No it doesn't.  There is no real evidence that the Marxist view of crises explains crises at all.  If you know of some then please point to it.
I said LTV crisis theories, meaning also classical economic theories of crisis.

Like I said classical economic crisis theory is the theory of underconsumption, that there is not enough consumption in the economy.  If we look we see a growing slump in consumption already, as factories cut back production it has rippled through the economy causing even less consumption causing commodity devaluation as you get gluts of commodites since workers can't consume them.

The Marxist crisis theory is slightly different, that value gets stuck in the from of commodites causing a falling rate of profit, again if we look we also notice this is true, capitalists faced with sudden drops in their returns and nowhere to invest hoard their money, causing smaller capitalists to run out of credit causing them to go belly up causing underconsumption. 

Quote from: Current
Also if the capitalist markets can easily deal with falling consumption then why hasn't it fixed it yet?  This crisis dates back to last year and back to the 1970's if you include the bubbles as part of the current crisis.
It is, as Heq mentions, the fault of the Federal Reserve.  Read a book on Austrian economics and all will become clear.
The Federal Reserve followed the monetarist theory that the Great Depression was supposedly being caused by a liquidity problem.  As for Austrian economics, they blame all capitalist crisis on contraction of the money supply so how can there be a contraction of the money supply when the Federal Reserve is pumping in liquidity?   LTV crisis theories make much more sense as it explains liquidity doesn't really mater (meaning the Federal Reserve pumping in liquidity didn't really do anything) that the problem is of surplus value not being consumed.
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« Reply #27 on: December 14, 2008, 14:51:31 EST »

This is one of the breakdowns in economics, the assumption of rationality.  People really suck at planning, really, really suck at it.
That's what I've been trying to tell Current for the last 30 years or so, judged my completely rational and accurate biological clock.

People are good about making rational decisions only if it is in the short term and emotional factors aren't prominent.  That can be simplified to people are not good at making rational decisions.
I don't think we really disagree so much.  You seemed to agree in our earlier conversations that the rules people use are accurate in most cases but break down in some particular cases.  That is hardly saying that people are "not good at making rational decisions".  I certainly am not claiming that people are perfectly rational.
The difference between our perspectives is the degree to which we consider those particular cases to occur, and the importance of such cases.  For example, as we are discussing, me and Heq do not think that people are not good at rationally planning for future.  People make countless small decisions each day, most of which are rational common sense built out of heuristics, such as looking before crossing the street, but if that one irrational decision about the future costs them their house, it costs them their house, mostly rational
or not, and if plans are not made to decrease the chances of such a decision backfiring, a lot of people will lose houses.  Were it not for out bloated bureaucracy, people would be far more vulnerable to such situations, and society would tear itself apart, because the free market is only capable of correcting itself if people are able to gauge the future, which they are either too irrational to be able to do, or simply lack the needed information anyway.  The capitalistic free market system is far too dependent on people acting smart and rational as a matter of course, while the system we have right now assumes that most people fail to do so some of the time and the some people fail to do so most of the time.

A democratic-republican government with a big bureaucracy is the worst form of government, besides all the others.  The bureaucracy is unpleasant, but the alternatives are even worse.
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« Reply #28 on: December 15, 2008, 01:31:04 EST »

I'm actually not for big government, as I think the government is also run by people who are, if anything, even less competant then random people pulled off the street (a bit of an excess, but you get the point).

However, one cannot simply turn the corner and run, people need to understand before they can have certain priveldges and the consequences thrust upon them, and I probably tacitly accept that there are whole slews of the population which will never be self sufficent (for whatever reason) and it is cheaper to coddle them then to let them run rampant.
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« Reply #29 on: December 15, 2008, 18:10:39 EST »

You don't need to solve these problems, bankruptcy will solve them.  Whoever can make use of the capital will buy it, history demonstrates that.  If another company can use all of GM they will buy the whole company.  If not they will strip out the profitable parts.

...and in stripping out the "profitable parts," you'll scatter the work force, many of whom don't have transferable skills nor access the proper training to obtain similar employment - and even if they did, it would be difficult to find new employment when the trend is to fire and not hire. That's one of the major reasons people are resistant to allowing bankruptcy; regardless of whether the business "deserves to fail," the employees certainly don't deserve to have their livelihood endangered.
The employees have for some time worked for companies that they know are not stable.  They should have thought about this and prepared for it by finding work elsewhere or by saving for that eventuality.
[/quote]

First, not everyone enjoys the same level of job mobility. I'm sure most workers are well aware that the company is unstable, but its not as if they can easily search for and obtain a new job. Even if they were willing to relocate (which has a negative impact on the quality of life when someone is still close to their extended family, among other things), there's little guarantee that they'd find comparable work giving the shrinking industrial base in the US. Those working in manufacturing typically can't find jobs above minimum wage due to the higher demand for advanced education and the stigma against manual laborers.

Second, even if the wage for these employees is substantial, it's not enough to adequately save. With the average income being greatly outpaced by the cost of living, these workers are going to be spending most of their income sustaining the current quality of life and doing what they can to ensure their children have opportunities. Unless you're significantly wealthy, you simply don't earn enough to save the kind of money it would take to protect against job loss.
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