Category Archives: Economics

Business, Economics, Media Criticism, Political Commentary

Bailout Rage

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Arnold Kling vents:

De Rugy and the others also mention my other frustrations. First, that the Republican Party betrayed libertarians so badly on this issue. Second, that the media portrayed opponents of the bailout as unserious and ideological. Bernanke, Geithner, and Paulson were hailed as saviors, even though they could just have easily been portrayed as bumblers. The whole thing was portrayed as government having no choice but to come in and clean up the private sector’s mess, rather than an ill-conceived attempt to stop markets from adjusting to a mess that was created by a combination of market failure and government failure. Third, that even though much of the public instinctively and correctly opposed the bailout, it sailed through without costing Congressmen their seats.

The one upbeat commentator is Len Gilroy. He thinks that the high level of indebtedness of government will force politicians to scale back spending and to privatize. I’m sorry, but he comes off sounding like Mary Poppins on laughing gas.

As a commenter notes, the only hope is that a lot of non-libertarians are outraged, too. I hope it doesn’t end in riots, but I hope it ends.

Business, Economics, Political Commentary

You Know The Auto Biz Is In Dire Straits

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…when Toyota is losing money:

Battered by falling demand from consumers around the world and a surging yen, Toyota and other Japanese automakers have been reducing earnings outlooks and cutting workers.

“The change that has hit the world economy is of a critical scale that comes once in a hundred years,” President Katsuaki Watanabe said at the company’s Nagoya office. The drop in vehicle sales over the last month was “far faster, wider and deeper than expected.”

Toyota forecast an operating loss of 150 billion yen ($1.66 billion) for the fiscal year ending March 2009. Toyota has never reported an operating loss since it began disclosing such figures in 1941. But it did have an operating loss in unofficial, internal calculations for the year ending March 1938 a year after the company was founded.

And they think that pouring billions down the Detroit rathole can save them in such an environment? Particularly when the union refused to give on work rules? Mickey Kaus has more, here and here.

What a disaster this administration has turned out to be at the end.

Business, Economics

More Bad News For My Home Town

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GM was planning to build a new plant in Flint to build engines for the Volt. But apparently those plans have been put on hold.

I’d be interested to understand more about the numbers, though:

General Motors is suspending work on the $370 million factory slated to build engines for the Chevrolet Volt, but says the plug-in hybrid will appear in showrooms by the end of 2010 as promised.

The decision comes as GM frantically slashes costs in a desperate bid to survive while the White House dithers on a bailout. GM and Chrysler have said they could be out of money by the end of the year, but Congress failed to approve $14 billion in short-term loans to the Big Three and the Bush administration appears to be in no hurry to act.

With cash dwindling fast, GM says it has no choice but to postpone work on the the factory in Flint, Michigan, where 300 people would build the 1.4-liter turbocharged engines slated for the Volt hybrid and Chevrolet Cruze compact.

So, they’re spending almost half a billion on a factory that employs only three hundred people? That sounds like pretty good productivity (though it’s not going to do a lot for Flint’s continuing economic decline). How many engines will it produce per annum?

And where does all that money go? Tooling, purchased from other places? How much does that investment in building the plant itself help the Flint economy? Not a lot, I’d imagine, other than the construction itself. I’m guessing that most of those hundreds of millions are going to automated equipment and robots shipped in from somewhere else. So while it’s not great news for the city to delay or lose it, it’s not like it was going to save it economically.

[Update a few minutes later]

Here’s the original announcement from last summer, in the Flint Journal. I was wondering if the plant was going in where the old AC plant had been demolished, but it looks like it is/was planned to go on Van Slyke, over by the airport, and next to the truck plant.

Business, Economics, Media Criticism, Political Commentary

It’s The Productivity, Stupid

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I have some thoughts today on the real problem with the UAW, over at PJM.

[Update a few minutes later]

More thoughts from Mickey Kaus — from Taylorism To Wagnerism.

[Update a little after 9 Eastern]

Here’s an excellent piece on the same subject by Michael Barone.

[Afternoon update]

Jim Manzi has more thoughts on Wagnerism versus Taylorism:

…there appears to be a cyclical nature to these things. More-or-less the same, basically sensible, method for business operational improvement — carefully observe current work practices, think of them holistically and in light of the goals of the business, and then redesign work practices — keeps getting reinvented. Taylorism, “Goals and Methods”, factory statistical process control (SPC), Total Quality Management (TQM), reengineering, and so on are all just manifestations of this approach. Each is typically pioneered by innovators who have a fairly supple understanding of the often unarticulated complexity of the task. It drives clear profit gains, and many other people want to apply it. A group of experts are trained by the pioneers, who are also quite effective. There is an inevitable desire to scale up the activity and apply it as widely as possible. It becomes codified into some kind of a cookbook process that can be replicated. This process becomes a caricature of the original work, and the method is discredited by failure and ridicule. (Seeing this phase of reengineering at several companies in the 1990s, a close friend of mine once described it as “like the Planet of the Apes, but the monkeys have taken over from the humans”.) Within a few years, some new pioneers develop some new manifestation of the approach, and the cycle begins again.

Just before I left Rockwell in the early nineties, they had caught on to the latest TQM management fad. We all went to courses on it, as well as taking classes based on the management philosophy of Stephen Covey.

Much of it was absurd. There is no sensible way to apply statistical management process control to research and development, but they attempted to do so, having us set out the processes by which we did trade studies, etc. This senseless training was, of course, charged to overhead (i.e., it was included as part of the burden on our Air Force and NASA cost-plus contracts). Just in case you were looking for more reasons that space stuff costs so much.

Economics, Space, Technology and Society

The Director’s Cut

6 Comments

When I wrote The Path Not Taken, over four years ago, for The New Atlantis, the original draft had to be cut to meet page-count requirements on the dead-tree edition (and it was also edited somewhat for style and content). I’ve decided to put the original, unedited draft on line for those interested, because it made some points that ended up on the cutting-room floor in the published piece, particularly regarding vehicle reliability.

It’s an even longer read now than the published one, but enjoy. Or not.

Business, Economics, Media Criticism, Political Commentary

What They Need

3 Comments

…but won’t get. Iain Murray describes what will be necessary for a successful auto industry:

…the best way to save the auto industry remains a deregulatory bailout, reducing government-imposed burdens on the industry, and in particular Congress backing off on its destructive CAFE requirements.

One of those government-imposed burdens is the Wagner Act and the NLRB that enables the UAW to maintain a stranglehold on the industry. Unfortunately, all of the above, while the most needed, are also the most unlikely things to be had from the new regime. If anything, as I’ll note in a Pajamas column tomorrow, they’re only going to make things worse.

Economics, Media Criticism, Political Commentary, Space

Broken-Window Fallacy Redux

7 Comments

In a discussion of Peter Diamandis’ recommendations to NASA (most of which I broadly agree with), Ferris Valyn makes the classical error in discussing government spending:

As for your other point:

You’re contradicting your statement that there is no guaranteed ROI. Money spent on NASA is money NOT spent on everything/anything else. You are assuming your conclusion is true and using that in your argument to prove your conclusion [otherwise known as “begging the question” — rs]. That’s not allowed.

Money spent, whether wisely or not, always grows the economy. Whether its the 60 cents I spent to buy gum, or government buying a new power plants, that money always grows the economy. The fundemental question is, whether it grows the economy in a way that we want to grow it. And while I will agree that we haven’t proven that space development grows the economy 100% in the way we want, I would argue that space development has a large preponderance of evidence supporting it.

No, it is quite possible to spend money and shrink the economy (and few entities are better at doing this than governments — see, for example, Soviet Socialist Republics, Union of). For instance (to use the classical example), we could institute a government program to pay half of the populace to dig holes, and the other half to fill them. How fast does Ferris think that the economy will “grow” under such a program?

This is also one of the classic lousy arguments that space advocates use to advocate. I discussed it in a column a few years ago. Space spending has to be justified on its merits, in terms of the return we get for it in terms of actual space activity. It can’t be justified simply as “spending” that “always grows the economy,” because there are potentially many other means of “spending” (such as simply letting the taxpayers keep their own money) that are much more effective at doing so.

Business, Economics, Media Criticism, Political Commentary

Is Atlas Shrugging?

8 Comments

“Blame me for the job losses”:

I caused part of this job loss and I know precisely why; the election. The results portend big trouble for small business.

The job destruction process has started. We are about 20% of the way through our ramp down process and on schedule to complete the shut down by spring 2009. Watch the financial news and you will see continued job cuts each month. We are not alone in our strategy. Far from it. Atlas has shrugged all over the country.

Like many business owners, we are no longer willing to take all of the financial and legal risks and put up with all of the aggravation of owning and running a business. Not with the prospects of even higher taxes, more regulation, more litigation and more emboldened bureaucrats on the horizon. Like others we know, we are getting out while the getting is, well, tolerable. Many who aren’t getting out are scaling back.

We learned just this week that getting out of business is harder than we thought. Take Republic Windows & Doors of Chicago, where being out of money and out of paying customers apparently does not give a business the right to shut down. Nor does it give that business’ bank the right to withhold credit. According to the unions, Jesse Jackson and the Governor of Illinois (yes, THAT governor), this company must continue to pay its employees salaries and benefits.

But pay them with WHAT? Liberals seem to be clueless as to where “the money” comes from. They love to tax, regulate and redistribute wealth — all the while decrying the very profit motive that created it — something they do not understand. If they did, they would not naively insist that a business that is out of money, out of customers and out of credit stay open so as to pay employees.

And that is but one example of why the lay-offs of November 2008 – which will be part of George W. Bush’s statistical record – fall in reality on the Obama election. Business owners understand that the election of 2008 just gave a lot more power to people who think like these liberals in Illinois. For crying out loud, an Illinois liberal is now “President elect” and he chose another one for his Chief of Staff. He chose Michigan liberals for his economic team. Illinois and Michigan are broke!

It is no secret that owners circulated endless emails leading up to election day discussing lay off plans were Obama to win. Entrepreneurs instinctively understand the danger posed by larger liberal majorities in power. The risk-reward equation and fierce independence spirit of start up businesses are anathema to the class warfare, equality of outcome and spread the wealth mentality of the left.

I blame the Democrats and big-government Republicans myself. Read the whole thing.