GENERAL MOTORS, RIP

General Motors was once not only the world’s greatest and most prosperous automobile company but the world’s greatest and most prosperous manufacturing company, indeed, the world’s greatest and most prosperous company of any kind. Its success, wealth, and economic power, were symbolic of the success, wealth, and economic power of the United States.

General Motors has now perished, brought down by a kind of philosophical and economic tapeworm that consumed the company from within. The economic tapeworm was the United Automobile Workers union, which transformed the company into a carcass upon which it could feed while tying GM’s hands and feet with arbitrary work rules that prevented it from competing and providing any addition to what was to be consumed by the UAW’s vultures. The philosophical tapeworm lay within the minds of those running the company. For decades, it led them never to take a stand on principle and forcefully resist the UAW. Always the present cost of a major strike was allowed to outweigh the prospect of the ultimate destruction of the company, which was never considered fully real because it lay in the future.

In its last years, the company was reduced to the status of a “benefits” company, a company existing primarily for the purpose of paying the pensions, medical benefits, and exorbitant wages of the UAW members. In its last year, the company was reduced to the status of a beggar-benefits company, as it repeatedly turned to the Federal government for the billions of dollars that were needed to keep it in existence for just the next few months, in the hope that in that time a miracle would appear that would allow it to survive.

Now the company is gone, along with the billions of dollars of “bailout” money needlessly spent to “rescue” it. It would have been far simpler not to have given any bailout money and to have allowed the bankruptcy to occur last fall. That would not only have saved billions of dollars, but it would have avoided the United States Government becoming the major stockholder in the company that will control many or most of the remaining assets of GM.

General Motors was destroyed by operating under the ignorance, stupidity, and irrational greed of a labor union. From this point on, it is to operate under the ignorance, stupidity, and irrational greed of government officials acting in combination with that same labor union. It will survive only if fresh billions continue to be thrown at it. It if survives, instead of being a source of wealth, it will be a continuing drain of wealth.

What has happened to General Motors is symbolic of what is happening to the United States. The United States is being destroyed economically and culturally by irrational theories and policies. The standard of living of its people is falling. Government officials are preparing to accelerate the fall by means of the imposition of insane policies designed to curtail energy consumption and roll back the production of wealth. The American people have elected a President who has expressed regret that the Supreme Court “never entered into the issues of redistribution of wealth” because it “didn’t break free from the essential constraints that were placed by the Founding Fathers in the Constitution.”

If a company as great and as economically powerful as General Motors once was can collapse into a shadow of its former self, so too can every other company in the United States. So too can the United States itself.

Copyright © 2009, by George Reisman. George Reisman, Ph.D. is the author of Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996) and is Pepperdine University Professor Emeritus of Economics. He is also a Senior Fellow at the Goldwater Institute. His web site is www.capitalism.net and his blog is www.georgereisman.com/blog/. A pdf replica of his book can be downloaded to the reader’s hard drive simply by clicking on the book’s title, above, and then saving the file when it appears on the screen.

Google Relents—Finally

At last Google has withdrawn its repeated description of this blog as “spam” and its accompanying threats to delete it.

Google seems to be a company that belongs somewhere in a world that might have been imagined by Franz Kafka, in that when dealing with it in a situation of this kind, a person is placed in a position in which he must confront a beast that is deaf, blind, and destructive, utterly impervious to all reason. The company has no email address that belongs to a live human being, or at least none that I could find. It has two listed phone numbers in its headquarters city of Mountain View, California. One of them offers five or six menu options none of which lead to a human being or any way to contact a human being. The second number does reach a human being, but that human being has no way to contact any executive and cannot deal with any such matter as a blog being threatened with deletion. Yes, it also has an 800 number, which duplicates the first of the Mountain View numbers.

A communication from the company promised an investigation by a human being “within two business days.” But no such investigation ever occurred. Between May 2 and May 21, in response to my requests to unlock my blog, I received the following three replies, all of them identical but for the date cited for the requests.

"Your blog is marked as spam

"Blogger's spam-prevention robots have detected that your blog has characteristics of a spam blog. (What's a spam blog?) Since you're an actual person reading this, your blog is probably not a spam blog. Automated spam detection is inherently fuzzy, and we sincerely apologize for this false positive.

"We received your unlock request on May 2, 2009. On behalf of the robots, we apologize for locking your non-spam blog. Please be patient while we take a look at your blog and verify that it is not spam.


"Your blog is marked as spam

"Blogger's spam-prevention robots have detected that your blog has characteristics of a spam blog. (What's a spam blog?) Since you're an actual person reading this, your blog is probably not a spam blog. Automated spam detection is inherently fuzzy, and we sincerely apologize for this false positive.

"We received your unlock request on May 11, 2009. On behalf of the robots, we apologize for locking your non-spam blog. Please be patient while we take a look at your blog and verify that it is not spam.

"Your blog is marked as spam

"Blogger's spam-prevention robots have detected that your blog has characteristics of a spam blog. (What's a spam blog?) Since you're an actual person reading this, your blog is probably not a spam blog. Automated spam detection is inherently fuzzy, and we sincerely apologize for this false positive.

"We received your unlock request on May 21, 2009. On behalf of the robots, we apologize for locking your non-spam blog. Please be patient while we take a look at your blog and verify that it is not spam."

At least a dozen of the readers of this blog went to the trouble of writing directly to the President of Google. One of them went to the trouble of also informing an extensive list of pro-free-market news commentators and bloggers about what Google was doing. It’s difficult to be sure what effect this had. To my knowledge, none of those who wrote to the president of Google ever received a reply. Nevertheless, I must assume that Google finally unlocked my blog in response to the strong reaction from these readers. I want to thank them publicly, for their support.

What this experience has taught me is that I never again want to be dependent on Google. Accordingly, I’ve spent much of the past few weeks reconstructing this blog in Word Press. The reconstruction is complete for 2009 and 2008, but has only just begun for 2007 and 2006. I invite readers to visit this new blog at www.georgereisman.com/blogWP/. (Please note that the last two letters must be capitalized in order to bring up the blog.)

It seems incomprehensible to me that Google, a company with possibly the most advanced search technology in the world, would somehow lack the technical expertise required for its robots to distinguish my blog, which has been in existence for over three years and has more than 140 postings on it, from a spam blog. It is equally incomprehensible to me why, if such is the case, and they know that their ability to identify spam blogs is “inherently fuzzy,” they would not have a human being spend five minutes looking at a blog they know is very likely a “false positive” for spam, and make a rational judgment about the matter in short order. And why they would not have a readily accessible system whereby they could be easily contacted and “false positives” for spam speedily corrected by that route.

Whatever the explanation, Google in this case has shown itself to be incompetent, grossly irresponsible, and cowardly. It apparently does not care about the consequences of its actions or show any readiness to correct them or willingness even to hear about them. Nothing less than a public campaign is required to get its attention. This is not a good performance for a company whose motto is supposedly, “Don’t Be Evil.” What Google has done in this case is evil.

***

If any reader knows how to port over links from Google’s Blogger to Word Press, I hope he will share his knowledge with me. The abundance of links to many of the postings on the Google version of my blog serve to keep me tied to Google. Please write to me at georgereisman@georgereisman.com.

Letter to Krugman

Letter to Krugman
May 4th, 2009

Dear Prof. Krugman:

In your NY Times column of today you write, “But if everyone takes a pay cut, nobody gains a competitive advantage. So there’s no benefit to the economy from lower wages. Meanwhile, the fall in wages can worsen the economy’s problems on other fronts.” You overlook the fact that the major benefit of a fall in wage rates is not any competitive advantage that it might give to one firm over another, but the fact that it allows the same total payment of wages in the economic system to employ more labor and the same total expenditure for consumers’ goods to buy more consumers’ goods at the lower prices resulting from lower wage rates.

You also write, “Things get even worse if businesses and consumers expect wages to fall further in the future.” That’s true, and because it is, the implication is that when wage rates fall to the level to which they’ve been expected to fall, there will be a substantial increase in the quantity of labor demanded and in total wage payments and consumer spending.

If you are open to a serious, detailed development of ideas on deflation and unemployment that are sharply at variance with your own, I’d like to recommend for your consideration two on-line articles of mine: “Falling Prices Are Not Deflation But the Antidote to Deflation” and “Standing Keynesianism on Its Head: as Employment Increases in Response to a Fall in Wage Rates, the Rate of Profit Rises, Not Falls.”

In the latter article, you can learn of the profound contradiction that exists between Keynes’ statement of the basis of the IS-LM analysis on p. 261 of The General Theory and his statement of the basis of the declining mec doctrine on p. 136 of The General Theory. The net upshot is that a fall in wage rates does in fact result in an increase in employment, in part because it is accompanied by a rise in the “mec” rather than the fall assumed by Keynes.

Cordially,
George Reisman, Ph.D.
Pepperdine University Professor Emeritus of Economics
Author of Capitalism: A Treatise on Economics
Web site: www.capitalism.net
Blog: www.georgereisman.com/blog/

IF THIS BLOG IS SILENCED

IF THIS BLOG IS SILENCED BY GOOGLE, PLEASE BE SURE TO VISIT http://www.capitalism.net/ FOR INFORMATION ON ITS NEW LOCATION.

Injustice as Routine

I want to take note here of two outrageous injustices that have occurred within the last few days. One, reported in the main front-page headline of today’s New York Times is that the United Automobile Workers Union and its pension fund is to become the largest stockholder in Chrysler when the firm emerges from bankruptcy. This is the very same union that brought about the collapse of Chrysler in the first place. Its philosophy and policy of grabbing ever more in wages and benefits while doing almost everything possible to prevent the company from earning the wherewithal to pay those wages and benefits made it impossible for the company to survive in the face of competition not subject to such union bloodsucking.

A further aspect of this same injustice is the government’s naked overriding of Chrysler’s contractual obligations to its bondholders in order to place the U.A.W. and its pension fund ahead of more senior debtors in the Chrysler bankruptcy. Those bondholders who stood up for their contractual rights were denounced by President Obama for refusing to make “sacrifices,” i.e., of their contractual rights. Many of them then gave in, fearful no doubt as to how the government might use its vast array of arbitrary powers against them if they refused, e.g., how the IRS would treat their income tax returns, how the EPA, SEC, FTC, et al. would treat their application for permissions of this or that kind.

The second injustice I want to note is that in this age of alleged “diversity,” a young woman, Carrie Prejean—“Miss California”—who apparently was on the verge of being declared “Miss USA,” was denied that title for no other reason than that one of the pageant’s judges did not like her opinion that marriage was a union between a man and a woman. In response to a question asked of the contestants, she had answered, “No offense to anybody out there, but that's how I was raised and that's how I think that it should be between a man and a woman.” The judge, one Perez Hilton, said "I was absolutely shocked and incredibly frustrated in her, and disappointed. That is not the kind of woman I want to be Miss USA.” So, to be Miss USA, a woman must comply with whatever beliefs such a “judge” wishes to impose. As of this writing there doesn’t seem to much anger and outrage over this travesty of justice.

NOTE: IF THIS BLOG DISAPPEARS, BE SURE TO FOLLOW MY POSTS AT WWW.CAPITALISM.NET (See my previous post for an explanation of this threat.)

Attempt to Silence This Blog

The enemies of free speech are attempting to silence me. Here is the notice I just received, supposedly from Google. Let Google hear from you about this outrage.



"This blog has been locked due to possible Blogger Terms of Service violations. You may not publish new posts until your blog is reviewed and unlocked.
This blog will be deleted within 20 days unless you request a review."

Fallout from Declaring CO2 a Pollutant (A Potential News Dispatch from a World Going Mad)

New York—Now that carbon dioxide has been declared a pollutant by the EPA, numerous local jurisdictions around the country, whose finances have been badly hammered by the current recession, are considering the imposition of “Exhalation Taxes.”

New York’s Mayor Michael Bloomberg and California’s Governor Arnold Schwarzenegger are reportedly preparing a joint statement citing the legitimacy and inevitability of taxes on CO2 emissions in general and on human exhalations of CO2 in particular. Humans emit CO2 into the atmosphere and thus contribute to global warming every time they exhale, in other words, every time they let out their breath. Some studies have estimated that taking all human beings together their exhalations account for as much as 8 per cent of all human-caused CO2 emissions. This is more than the proportion emitted by all privately owned aircraft in the world and is thus an important and fruitful target for reduction.

The Obama Administration has until now preferred a system of “cap and trade” as the means of limiting CO2 emissions, rather than any direct tax on emissions. Under that system, the Federal Government will limit the overall total amount of permissible emissions but allow individuals to emit as much they wish by buying the emission rights of others. A high official in the New York City government, who spoke on condition of anonymity, said that the Mayor and the Governor have arranged for a joint task force, financed at the Mayor’s expense, out of his personal fortune, to study the feasibility of adapting this system to human exhalations. A particularly troubling aspect of any adaptation, the source explained, is how to combine it with plans by the Federal Government gradually to reduce the overall total of permissible emissions.

Among the task-force’s assignments are determining the extent to which people might use the oxygen they breath in more efficiently (oxygen-efficiency option), so that they would be able to correspondingly reduce their exhalations of CO2. Another potential solution under study is the possibility of sequestering the exhalations in jars and various other containers, so as to reduce the overall release of CO2 into the atmosphere (CO2 sequestration option).

No official estimates have been released as to what the average person might expect to have to pay in order to exhale in compliance with the law, but some insiders place it initially as working out to as little as 50 cents per day. According to polls conducted among individuals who identify themselves as environmentalists or as political moderates, the general consensus is that “we can live with that” and “it’s a small price to pay, to keep the planet safe.”

Support for higher exhalation taxes and/or more stringent cap-and-trade limitations is indicated by the reported brisk sale of bumper stickers urging “polluters” to stop exhaling altogether. The stickers say, “Stop Exhaling, You God-Damned Polluting Bastards.” It is unclear whether the drivers of the vehicles which carry the stickers count themselves as polluters too.

In contrast to the extremist position expressed in such bumper stickers, key Obama Administration officials and Congressional leaders are reportedly prepared to guarantee that “no American will ever be allowed to be in a position in which he cannot afford to pay for all of his reasonably necessary exhalations.” The Federal Government, they say, will provide whatever financial subsidies as may be necessary to assure everyone’s right to exhale on terms that he can afford.

Copyright © 2009, by George Reisman. George Reisman, Ph.D. is the author of Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996) and is Pepperdine University Professor Emeritus of Economics. He is also a Senior Fellow at the Goldwater Institute. His web site is www.capitalism.net and his blog is www.georgereisman.com/blog/.

“Green” Jobs

President Obama has proposed combining stimuli to promote employment with the fight against alleged man-made global warming, which allegedly results mainly from the burning of fossil fuels. Hundreds of thousands if not millions of new “green” jobs will supposedly be created by replacing power from fossil fuels with power from windmills and solar panels. They will be created in the construction of the windmills and in the production and installation of the solar panels, and also in the construction of a new power grid to carry all the electricity that is supposed to result.

A rather serious problem, which seems largely to have been ignored by those urging a race to build windmills and solar panels, is the fact that the wind does not always blow, nor does the sun always shine. And as yet there is no large-scale economical method of storing electricity for later use. This would seem to imply a need to retain the present system of power production alongside the new system that is to be based on wind and sun, or else to grow accustomed to protracted periods without power.

Or is it the case perhaps that this problem is to be taken as an opportunity for even greater gains in employment in connection with wind and solar power? These might be achieved if, in all those times when the wind does not blow or the sun does not shine, human beings were employed in rotating copper-clad generator shafts, in a manner similar to that of rotating a grindstone in a gristmill, only in the presence of surrounding magnets, so that electricity could be produced by the rotation. (I don’t know how much, if any, electricity might actually be produced in this way. But it would keep people employed in the attempt.)

Indeed, advancing the goals of environmentalism is capable of creating a virtually limitless number of jobs. Big-rig trucks and their “polluting” emissions might be done away with by replacing them with human porters who would carry freight on their backs. Ocean-going ships and their emissions might be done away with by replacing their “dirty engines” with the clean labor of banks of oarsmen. (Sails would be a substitute too, but they are no match for oarsmen when it comes to the number of workers needed.) Automobiles and their emissions might be replaced by sedan chairs and teams of litter bearers.

And if all that is not enough, then think of the jobs that might be created in making coal in the ground absolutely safe. At present there are outcries over the release of trace amounts of mercury, arsenic, and other heavy metals from above-ground accumulations of coal sludge. Yet these metals are found in nature-given, below-ground deposits of coal as well, and could not appear in coal sludge if it they had not first been present in below-ground coal. While perhaps a smaller threat to human health so long as they are locked in below-ground coal, they must undoubtedly represent some threat, if only at the level of parts per billion or parts per trillion.

Since one can never be too safe, it follows that if job creation is the goal, an environmentalist case can be made for extracting all known coal deposits and then, instead of using any of that coal for such environmentally “destructive” purposes as producing electricity or heating homes, simply reburying it. But this time in repositories lined so as to prevent any possible leakage of heavy metals into the surrounding environment.

And finally, think of all of the jobs that a program of environmental “stewardship” might make available. Thus each patch of desert, each rock formation, each clump of grass, and each tree stump, might have assigned to it one or more “stewards” whose job would be to watch over it, protect it, and “preserve it for future generations.” To carry out this valuable work, there could be a whole corps of “stewards.” They could be dressed in special uniforms displaying various ranks and medals, all gained in “service to the environment” and the defense of nature and its resources against the humans.

Indeed, once we put our minds to it, nothing is easier than to think of things that would require the performance of virtually unlimited labor in order to accomplish virtually zero result. Such is the nature of all job-creation programs. Such is the nature of environmentalism. Such is thought to be the path to economic recovery by most of today’s intellectual establishment.

Postscript: I want to note that my book Capitalism: A Treatise on Economics provides further, in-depth treatment of the substantive material discussed in this article and of practically all related aspects of economics. Of special note here is the fact that Chapter 3 of the book is a thorough-going critique of environmentalism. The critique is coupled with a positive demonstration of the fact that under capitalism and its economic freedom the supply of economically useable, accessible natural resources is capable of continuing further increase as man expands his knowledge of and physical power over nature. It is also joined by a demonstration that such increase in man’s knowledge and power at the same time serves progressively to improve his environment, understood as his external physical surroundings, deriving its value from its contribution to human life and well-being. In addition, Chapter 13 of Capitalism provides a critique of all variants of the notion that a problem of economic life is the creation of work rather than wealth.

*Copyright © 2009, by George Reisman. George Reisman, Ph.D. is the author of Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996) and is Pepperdine University Professor Emeritus of Economics. He is also a Senior Fellow at the Goldwater Institute. His web site is www.capitalism.net and his blog is www.georgereisman.com/blog/. A pdf replica of his book can be downloaded to the reader’s hard drive simply by clicking on the book’s title, above, and then saving the file when it appears on the screen. The book provides further, in-depth treatment of the substantive material discussed in this article and of practically all related aspects of economics.