Free Markets and Bailouts - Cars, Houses, Energy.

Date:   11/17/2008 11:57:56 AM ( 16 y ago)

Novermber 16th, 2008 - "Automaker Bailouts"

We are in a time when the economy is under a microscope, due to the problems of the "upper layers" of the banking and financial services industry.

Also, the money that the government has can be used to influence how the economy works. Besides helping the banks by topping up the money used to make loans, government money might be used to prop up other industries such as the automakers.

Proponents of the idea to loan General Motors some money - perhaps $25Billion now and more later - are pointing out that "if G.M. goes down, their employees will not get their pensions, and will end up on government pensions".

I have to point out the error in logic about those pensions - isn't it government money either way? If government money props up GM, or if government ends up paying ex-G.M. workers a pension in their senior years, those workers are getting taxpayer money anyhow.

Does it really matter if those workers get GM pensions that are only going to be there if government money is used to prop up a failing business such as G.M., or if they are being paid directly by government? And who says that the United States government is going to give them a pension anyhow? Maybe those workers have made good use of their high wages and can live off their own savings, or maybe their investments will end up being valuable.

If there is one good thing about the "free market" ideology, it is that it removes the deadwood from the economy. Market pressures help ensure that consumers are getting a good value for their dollars.



-------------Part Two - "The High Cost of Major Purchases and Services"

Why are cars and houses so expensive, and why are energy costs so high? When we buy a vehicle, we are essentially paying for those bloated wages of the GM workers - often as high as $70 per hour!! - and the unwieldy pension funds they have allowed to develop over the years.

CARS:
The actual price of the materials in a car, plus a reasonable labour cost to put it together, would be less than half of what we have become used to paying. Or not pay - many people cannot EVER dream of buying new car, certainly not cars that cost $50,000 or more. Market forces are not allowed to be at play here - an enterprising corporation that wants to build cheaper cars - without the bloated salaries and pension funds that cause the price of cars to be so high - is not allowed to compete against the auto giants. Government gets in the way, G.M.'s lobbyists make sure of that.

GM has not been making cars that people want to buy. That is a good enough reason to let GM die and some other corporation take it's place.

People are lining up, even paying in advance, for electric cars in the few places where they are even "allowed" to be built and driven. These are the cars many people want, but they will mean less profits for the oil industry, so there is resistance from many areas to making them. Parts suppliers could be making parts for electric cars instead of for GM cars. GM stalls when it comes to rolling out electric cars, claiming the batteries are not ready yet... but TESLA has managed to overcome that problem, and they do not have nearly the resources that GM does.


HOUSES:
Same thing with a house - the wood and other materials in a house, plus the cost of hiring construction workers to build it, only costs about $50 to $75 per square foot. In other words, people who would be happy to live in a 1000 sq. foot house should be able to buy one for about $50,000!! Every family deserves to live in at least a modest house, and there are lots of workers who are willing to build homes, but this lower end market has been squashed in favour of the "mini-mansions" that bring developers much more profits. The market forces are being skewed here.

To help developers, there have been local bylaws demanding that only larger houses - over 1500 square feet, for example - CAN be built. Again, government has gotten in the way of the free market spirit. It hurts the middle and lower income classes, but it help the wealthy developers.

Our economy has been going down this road for too long, and I think that the shit is hitting the fan, finally. It is just so wrong for government to be getting in the way by propping up the bloated, wealthy-friendly industries.

ENERGY:
With ENERGY - this is my favorite topic - we only need to embrace renewable energy to bring down the cost of energy. Once a wind turbine is set up, it pays for itself in about 5 years, and after that it produces "free energy" for another 20 or more years!! Overall, this ends up being much cheaper energy than is produced by constantly shovelling coal into a burner to make electricity [with steam]. Once again, the free market is not allowed to be at play - there are subsidies for coal used in those burners [for example - no "natural resource royalties" have to be paid when coal, or natural gas, is used to make electricity, and that coal originally belongs to the people, as a natural resource, but it is being given away when used to produce electricity].

Arrrgggg - we could have cheap, clean energy, but instead we end up paying more for something that contributes to global warming!!!

Some smart individuals are getting in on the advantage of renewable energy by setting up solar panels on their rootops. They estimate that spending the money now, and collecting the revenue for any extra energy the panels produce, is like having a pension fund!!






------------------Part Three - "The Buzz"

Much has been made of the high wages of upper management. Bailing out industries that pay their CEOs $50Million a year just makes people angry!! However, that might just be a distraction from the real reasons that products cost so much. {Executive compensation only accounts for less that 1% of the costs of products.} I do agree they make too much, but it isn't the real reason for high costs.


Finally, when they talk about the need to bail out automakers, claiming that the parts industries and all the other off-shoot jobs will also be lost, it is a lie. Those parts makers will just supply a different automaker!! Also, the GM factories will not just disappear, they will be there for another corporation to build cars in. Other workers will be able to have jobs, and the workers who have been making $75/hr an live off their savings... imagine how it feels to a person earning $15 an hour and dreaming of owning a car someday, or a house, when those $75/hr workers are getting all the government help... especially when that government money is partly the taxes the lower-paid workers have paid!!


CONCLUSION:
Let the people get what they want - affordable houses, cheap clean energy, and electric cars!! The market, if government gets out of the way, will reward the industries who make them.







 

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