Monday, December 8, 2008

We have met the enemy . . . .

Many people are looking for scapegoats for our current economic downturn. Traditionally the right likes to blame the government for all problems, but they are having difficulty making a plausible case that the government caused this year's economic collapse. The right would also like to blame the unions, but the unions are too weak to be viewed as much of a threat to the economy any more. Of course they can always blame the Democrats, but not too many people are buying that either. Traditionally the left likes to blame big business for any economic suffering, and this theory is gaining some traction in a year of leftish ascendancy. But this theory is incomplete, as it leaves out another culprit for the current mess, namely ourselves.

Even though the heads of the Big Three automakers have accepted some responsibility for their mistakes, they did not cause all of their own problems. Nobody was forcing people to buy all of the SUVs and big cars that Detroit has been profitably making for years. The fact is that for awhile the American people could not seem to get enough of them. When gas prices were so high this summer, I might have felt a bit sorry for all the solo drivers in Lincoln Navigators and Cadillac Escalades that I still saw zooming around, but I feel fairly certain that those drivers had other vehicle choices. The Big Three can plausibly argue that they were only responding to market demand, and while they admittedly were too slow to respond to a sudden change in demand, they can also plausibly contend that they were caught by surprise by the sudden shift in the American peoples' tastes, caused in large part by an equally sudden spike in the price of crude oil. It is worth noting that GM makes a profit almost everywhere in the world except for the United States, which shows that the company usually does a pretty good job of building the cars that the market is demanding. It is also worth noting that the Big Three operate at a significant disadvantage to foreign competitors who have built plants in the US more recently. They are saddled with pension and health care costs that greatly exceed the costs of the newcomers, all of whom like to build their plants in right to work states full of young workers.

We also bear some responsibility for the housing market bubble, and the stock market bubble, and every other bubble we have experienced over the last few years. Collective greed and loss of rationality cause all of these bubbles, as has been well documented since at least the history of tulips. Why did people buy houses they could not afford at the peak of the market? Because they thought the market would continue to go up of course. But before we blame those people, we should remember that the rest of us had a good opportunity to sell our houses at the peak of the market, but did not do so because we did not believe a crash was coming. And if more of us had sold, and fewer of us had bought at those prices, the crash would not have been as severe. So we all contributed to the current downturn, and probably the only way we will reverse it is if we all start contributing to another upturn. Now might be a good time to buy a house, or an American car, or some stock.

And for those who don't remember the famous quote from the comic strip Pogo, the remainder of the title of this post should read " . . . and he is us."

1 comment:

  1. Never buying another American car again. The Saturn VUE we bought in 2005 has less than 100,000 miles on it, and has had to have the struts changed almost every year. Sometimes *more* than once a year. The only thing still running fine on it is the engine -- made by Honda. My 1995 Toyota Corolla (made in America) has over 150,000 miles on it, and runs like a dream. The only time I had to replace anything on it was because I broke it myself.