The electric car giant Tesla had a tough break in the first quarter of 2019. The company announced Wednesday that it had lost a stunning $702 million.
By Joshua D. Glawson | United States
The rise and fall of the Detroit automotive industry is a classic example of the problems of cronyism, labor unions, and corporate welfare. Thomas H. Klier, who is the author of “From Tail Fins to Hybrids: How Detroit Lost its Dominance of the US Auto Market,” points out some key concerns with the decline of the auto industry. However, Klier fails to demonstrate the imperative issues of US government marketplace meddling and power-drunk control, and how the government was the biggest driver for the auto industry’s demise and crash.
Klier begins his narrative with determining there are three distinct phases that made up the decline of the US auto market: One, The 1960s’ foreign imports; Two, the 1979 oil crisis; Three, the 2008/2009 Great Recession.
First, a market, in order for it to be the healthiest and most productive, is best left alone with little-to-no government involvement. A market thrives on competition, supply, and demand, while freely and voluntarily exchanging goods and services. When the US government involves ‘itself’ in the business of others, it automatically stunts the growth and capabilities of that industry.
After the gas-powered automobile was invented in Europe, Americans had gained an edge in the market with lower wages and overhead compared to that of Europe. By 1899, there were already over 500 automaker companies in the US. However, this created a saturated marketplace, and after WWI by 1929, there were only 44 companies making gas-powered automobiles in the US. The Great Depression would then finish off the remainder of these, dwindling that number down to an even fewer number which would eventually make way for the US “Big Three,” i.e. General Motors, Ford, and Chrysler. The Progressive Era, from the late 1890s to the 1920s, ushered in more government involvement in all industries, including that of the automotive industry.
By 1933, President Franklin D. Roosevelt (FDR), established the National Industrial Recovery Act (NIRA) which was intended to give a coercive protection of these various special industries and workers, including that of the automotive industry. Not only did this Act provide economic protection to various industries, but it also subsidized, fixed prices, and destroyed market competition. FDR’s protectionism and cronyism led to the development of the United Automobile Workers’ Union (UAW).
Of course, as any labor union will proclaim, this coerces the market to higher prices in order to pay workers higher wages. Labor unions also restrict the flexibility of the company because once a labor union is established, there is more bureaucracy, red tape, fees, and fields where only the “specialized” laborers are allowed to do their part. This essentially drives out competition through a coercive government monopoly by fixing prices, and removing the flexibility of standard supply and demand, while only allowing certain political elites to arbitrarily determine what a “fair” price should be.
Simply put, if subject A, Jane, says she will only work for a certain price as determined by the government and labor union, but then subject B, Joe, says he will work for a lower price as to be more competitive, this would not have been allowed by law. So, along with many other economic factors, the prices of cars went up along with the subsidized pensions and wages of the auto industry’s workforce. In the 1960s, with an influx in imports due to more competitive pricing, the Detroit automotive market began to decline, as pointed out by Klier.
Klier is also neglecting the emphasis on tariffs, which choke markets. After WWII, any “benefits” the US had gained from the war had already begun to significantly diminish by the 1970s.
Second, almost since the very birth of the oil industry in the US in the 1800s, the US government has been involved in controlling who can and who cannot be involved via government cronyism. Examples of government tampering and controls of the marketplace, which includes that of the automotive and oil industries, are the Sherman Antitrust Act of 1890, heavy oil provisions to France and England in WWI, the Mineral Leasing Act of 1920, the 1928 Red Line Agreement, 1933 oil production quotas, 1933 oil import duty taxes, WWII rations, 1948 Marshall Plan, 1959 Mandatory Oil Import Program, establishing OPEC in 1960, 1967 Arab oil embargo, and so on.
Along with these coercive involvements in the marketplace, by the 1960s there were also laws implemented to force car manufacturers to have certain safety features, which also leads to increased costs. Nevertheless, oil and petroleum products such as gasoline were already strictly regulated, and slowly choking the auto industry. Today, the US oil industry “benefits” from over $200 Billion in subsidies, and countless regulations. Much like the story of ‘I, Pencil‘, which demonstrates the complexity of the marketplace, so too are the numerous subsidies that plague many industries and stages of production, especially that of the auto-industry- petroleum, oil, gas, plastics, metals, workers, manufacturing, import tariffs, export tariffs, foreign manufacturing, shipping domestically and abroad, etc.
Three, the economic crash or Great Recession of 2008, or others cite 2009, which assisted in the temporary downfall of the auto industry of Detroit, specifically, was again caused by government involvement. With a minimum of nearly 600 confirmed laws that regulate and set pseudo-standards for the automotive industry in the US, it makes it so that running a car manufacturing company, much less starting one, is nearly impossible.
Various states and the federal government have continuously provided subsidies to the Big Three of Detroit, and this negates the standard of measuring supply and demand. When people or companies are given “free money” they do not have to compete in the market the same way, and they do not have to concern themselves with their next dollar earned as someone who must work and compete for it. Finally, when the bailouts came for the Detroit auto industry, it was nearing $90 Billion.
Of course, subsidies do more than redistribute wealth from those paying taxes to those that are gaining the plunder. Subsidies, as previously mentioned, also cut supply and demand, while also driving out competition due to inability to compete with increased funding, and stifles creativity and flexibility in the marketplace as demands and desires increase. It makes the company receiving the subsidies lose interest in market needs because they are doing better with the easy money from the government.
Many will support subsidies because they believe it helps save jobs or makes things cost less, but in fact, that is an economic fallacy to assume such. A subsidy is still supported through taxes, which come from the citizens, and this proves to add to inflation and falsifying prices as it helps falsely prop a market. It also influences the GDP as it assists in purchasing and subsidizing products that many people may not actually want. GDP will reflect as being up, when in fact it was all junk coercively purchased off the dime of everyday citizens.
While I can agree with the author that certain stages are evident in the downfall of the auto industry, especially in Detroit, it was ultimately caused by government influence, laws, coercion, subsidies, and cronyism, not the marketplace itself.
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Indri Schaelicke | United States
It’s midterm season, meaning that the lore of socialism is gripping every voter’s concience. Socialists have added the misnomer “democratic” to their political identification in hopes of persuading the last few sane voters that their ideaology is rooted in the same false peace and prosperity that Americans believe the United States is.
By Dylan Byrne | USA
Asking the average American what force poses the most danger to humanity will most commonly generate answers such as ISIS, North Korea, and climate change, among others. The state appears only as an anomaly within this group of answers, and this is precisely what the state desires. The government need not lift a finger to grow a public distaste for those who defy the status quo; the people, so blind of their enslavement, will be swift to cast away these defectors themselves. Those who wish nothing but to open the eyes of the public to the infringement upon basic human rights by the elite are labeled as lunatics, uninformed, and utopian; a risible circumstance if this were not to be the cruel reality. As Abraham Lincoln once famously stated, “A house divided against itself cannot stand,” and, after reviewing the evidence and tactics of the state, it becomes quite clear that they are currently demolishing the foundation of the house of America so that they may erect a most formidable human plantation.
I cite Operation Northwoods as a prime example of the state’s desire to amass popular opinion for an otherwise unethical goal. The operation was drafted by military officials in 1962 who wished to commit terror attacks upon American civilians only to blame it on Cuba so that a war between the two nations may be justified. To quote the document, “The desired resultant from the execution of this plan would be to place the United States in the apparent position of suffering defensible grievances from a rash and irresponsible government of Cuba and to develop an international image of a Cuban threat to peace in the Western Hemisphere.” Quite obviously, this was rejected by President Kennedy (thankfully) but still stands as a testament to the inner workings of Washington and their complete disregard for the lives of its citizens. One must ask themselves if any other catastrophic events in modern American history could have been precipitated – or at the very least, taken advantage of – by the federal government.
More examples of these false accusations can be brought to attention. For instance, the second red scare heightened American fears of the growing popularity of communism around the globe and ushered in McCarthyism, a tactic exclusively used to instigate fear into the public’s mind. But did communism prove to be an immediate threat to America during the scare? No. It was arguably the people that proved to be their own worst enemy; in their insatiable fear of communism, they allowed for the government to expand to combat this fictitious idea that communists were infiltrating American politics. The state couldn’t possibly pass this opportunity up, and thus, anti-communist propaganda was mass produced and spread across the nation intensively. This occurrence has seemed to manifest itself in similar circumstances involving different issues but ultimately leading to the same outcome. As explained by former Nixon advisor John Ehrlichman, the Nixon White House’s two main enemies, that being black people and the anti-war left, attributed these groups with heroin and marijuana, respectively, and heavily criminalized both. They lied about the drugs so that they could overreach the boundaries of their allowed power and expand the police force to further their agenda. The drug war is still happening today because of the lies perpetrated by hateful politicians, and the people, ignorant of the true problem, continue to legitimize the actions of the state. Fast forward a couple decades after Nixon’s presidency and, yet again, this blueprint for increasing government power was followed once again. Following the 9/11 terrorist attacks, the nation was consumed by trepidation. The people called for their government to take action, and their government was happy to abide by their wishes, signing the Patriot Act on October 26, 2001, and thereby obliterating the security of the American people inside their own homes.
Now we enter a new cycle of this state-induced scheme in the form of the conflict between the United States and North Korea, but why are they the enemy? Have they ever committed an attack upon another country anytime recently, let alone our own? No. Have they proved to be a legitimate threat towards other parts of the globe? While they may act like they do, mutually assured destruction debunks this claim in the fullest. So what exactly does the United States accuse them of? Why the state must know that their threats don’t mean anything. While the politicians may be nefarious, they are certainly not inept or stupid. The government’s main claim is that their attempts to obtain nuclear weapons must be stopped at all costs. But what value does their nuclear arsenal hold if utilizing it will result in total destruction of the country, something which is the antithesis of the current dictator’s interests? It must be made clear that North Korea is nothing but a vehicle which the government will abuse to further their own powers.
The government has done nothing but expand over its lifetime. According to the US Department of Labor, the size of the government has increased from roughly 6 million in 1950 to nearly 22 million in 2015. By this statistic alone, it is evident that the American people have abandoned the values which were instilled during the founding of the nation; that being limited government and equal division of power. So I direct this to you, the reader: do not fall for the propaganda of the state and its social conditioning institution it calls “media”, but instead think critically of the country’s enemies and the role they play in domestic politics.