Dr. Sowell Hits a Home Run

Thomas Sowell Hits The Nail Right On The Head: Detroit and Michigan have followed classic liberal policies of treating businesses as prey, rather than as assets. They have helped kill the goose that lays the golden eggs. So have the unions. So have managements that have gone along to get along.


Postponing Reality

December 17, 2008

Some of us were raised to believe that reality is inescapable. But that just shows how far behind the times we are. Today, reality is optional. At the very least, it can be postponed.

Kids in school are not learning? Not a problem. Just promote them on to the next grade anyway. Call it "compassion," so as not to hurt their "self-esteem."

Can't meet college admissions standards after they graduate from high school? Denounce those standards as just arbitrary barriers to favor the privileged, and demand that exceptions be made.

Can't do math or science after they are in college? Denounce those courses for their rigidity and insensitivity, and create softer courses that the students can pass to get their degrees.

Once they are out in the real world, people with diplomas and degrees-- but with no real education-- can hit a wall. But by then the day of reckoning has been postponed for 15 or more years. Of course, the reckoning itself can last the rest of their lives.

The current bailout extravaganza is applying the postponement of reality democratically-- to the rich as well as the poor, to the irresponsible as well as to the responsible, to the inefficient as well as to the efficient. It is a triumph of the non-judgmental philosophy that we have heard so much about in high-toned circles.

We are told that the collapse of the Big Three automakers in Detroit would have repercussions across the country, causing mass layoffs among firms that supply the automobile makers with parts, and shutting down automobile dealerships from coast to coast.

A renowned economist of the past, J.A. Schumpeter, used to refer to progress under capitalism as "creative destruction"-- the replacement of businesses that have outlived their usefulness with businesses that carry technological and organizational creativity forward, raising standards of living in the process.

Indeed, this is very much like what happened a hundred years ago, when that new technological wonder, the automobile, wreaked havoc on all the forms of transportation built up around horses.

For thousands of years, horses had been the way to go, whether in buggies or royal coaches, whether pulling trolleys in the cities or plows on the farms. People had bet their futures on something with a track record of reliable success going back many centuries.

Were all these people to be left high and dry? What about all the other people who supplied the things used with horses-- oats, saddles, horse shoes and buggies? Wouldn't they all go falling like dominoes when horses were replaced by cars?

Unfortunately for all the good people who had in good faith gone into all the various lines of work revolving around horses, there was no compassionate government to step in with a bailout or a stimulus package.

They had to face reality, right then and right there, without even a postponement.

Who would have thought that those who displaced them would find themselves in a similar situation a hundred years later?

Actually the automobile industry is not nearly in as bad a situation now as the horse-based industries were then. There is no replacement for the automobile anywhere on the horizon. Nor has the public decided to do without cars indefinitely.

While Detroit's Big Three are laying off thousands of workers, Toyota is hiring thousands of workers right here in America, where a substantial share of all our Toyotas are manufactured.

Will this save Detroit or Michigan? No.

Detroit and Michigan have followed classic liberal policies of treating businesses as prey, rather than as assets. They have helped kill the goose that lays the golden eggs. So have the unions. So have managements that have gone along to get along.

Toyota, Honda and other foreign automakers are not heading for Detroit, even though there are lots of experienced automobile workers there. They are avoiding the rust belts and the policies that have made those places rust belts.

A bailout of Detroit's Big Three would be only the latest in the postponements of reality. As for automobile dealers, they can probably sell Toyotas just as easily as they sold Chevvies. And Toyotas will require just as many tires per car, as well as other parts from automobile parts suppliers.




All should read his “Basic Economics” and “Economic Facts and Fallacies”.

Josie06 Josie06
56-60, F
3 Responses Dec 16, 2008

i think that whats we need most these days Toby2day ... reading and pausing and thinking.<br />
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i believe we, as people, allow the MSM and the press to form our opinions and never do we expend the effort to understand something and form an opinion.<br />
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Thanks for sharing.

More to mull over:<br />
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video at: http://info.detnews.com/video/index.cfm?id=1189<br />
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By Neal Boortz<br />
@ November 26, 2008 <br />
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We got dozens of emails yesterday to Nealz Nuze saying that I must see this video about a Ford plant. Okay you are probably thinking "big deal, Boortz." But if you watch the video it explains how Ford has created a new, innovative manufacturing plant that streamlines production and makes operations much more efficient. They can make 5 different types of vehicles at this plant. It does this by allowing Ford suppliers to be integrated into the assembly line process. So the suppliers making the seats, the dashboards, the fuel systems ... they have assembly lines right inside the Ford factory. Makes sense, rather than relying on shipments of parts. No waiting. No shipment costs or delays.<br />
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Oh but there is one thing I forgot to tell you. This Ford plant is in Brazil.<br />
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Yep. And do you know why it is in Brazil? Unions. The UAW is opposed to this type of innovative manufacturing. They are opposed to innovation that would actually help their employer because they stand the risk of losing jobs. And if they lose jobs, they lose power.<br />
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I'm sure another reason, although it doesn't say it in the video, is tax rates. But that's a whole other issue.

Bailout my a*s! Did you know:<br />
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General Motors to Invest $1 Billion in Brazil Operations -- Money to Come from U.S. Rescue Program<br />
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By Russ Dallen<br />
Latin American Herald Tribune staff<br />
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SAO PAULO -- General Motors plans to invest $1 billion in Brazil to avoid the kind of problems the U.S. automaker is facing in its home market, said the beleaguered car maker.<br />
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According to the president of GM Brazil-Mercosur, Jaime Ardila, the funding will come from the package of financial aid that the manufacturer will receive from the U.S. government and will be used to "complete the renovation of the line of products up to 2012."<br />
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"It wouldn't be logical to withdraw the investment from where we're growing, and our goal is to protect investments in emerging markets," he said in a statement published by the business daily Gazeta Mercantil.<br />
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Meanwhile, he cut the company's revenue forecast for this year by 14% to $9.5 billion from $11 billion, as the economic crisis began to cause rapid slowdowns in sales.<br />
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GM already announced three programs of paid leave, and Ardila added that GM Brazil "is going to wait and see how the market behaves in order to know what decision to take" with regard to possible layoffs.<br />
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For Ardila, the injection in Brazil's automobile sector of 8 billion reais ($3.51 billion) recently announced by the federal and state governments of Sao Paulo "has already begun to revive sales," which fell by 12% in October.<br />
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The executive said that the company will operate a "conservative" scenario in 2009 with an estimated production of 2.6 million units, and another more "optimistic" that contemplates sales of 2.9 million.<br />
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This year sales will reach 2.85 million vehicles, which represents a growth of 15% over last year.<br />
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Russ Dallen with EFE in Sao Paulo<br />