On why the USA auto industry bailout is so different from the bailout of Wall Street.
Of all the accomplishments of the industrial classes, arguably the greatest triumph is the mass-produced automobile. The distilled genius that is an automobile is an amazing bargain--if a $25,000 car was produced by the folks who price medicine, or law, or military hardware in USA, for example, it would cost millions. Even entry-level cars are brilliant accomplishments while something like a Lexus LS is so amazing, one wonders how mere mortals can actually build one.
Because the mass-produced automobile has changed the culture from city planning to sex, it is a direct threat to this essential pillar of Leisure Class power. The revolutionary cultural assault posed by the automobile is manifest at many levels. For example, when the Leisure Class ran things, the world's greatest sculptors carved statuary for the church--now they shape fenders for Ferrari.
The Leisure Class is mostly amused by the cultural manifestations of the automobile—sneering at them like they do with car songs. But it is the automobile industry’s cultural assault on economics that cannot be tolerated.
Great news for us old Keynesians
The Associated Press reported (on Friday June 6, 2008) that the International Energy Agency claims a serious effort to combat global warming will cost $45 trillion. I happen to think this is an underestimate. But the idea is very good. And if we run the global economy with sound economic policy, such a project could lead to the greatest prosperity in human history.
There has been a lot of invented terminology to describe the change in fortunes of the Keynesians and the Friedmanites. But the MOST descriptive was that it marked the change from Industrial to Finance Capitalism. If River Rouge was the defining symbol of Industrial Capitalism, then the archetypical example of Finance Capitalism was Enron.
Enron embodied the major flaws of Finance Capitalism--it was only possible because of economic deregulation, it relied on a willing suspension of disbelief in all reasonable measures of prudence, it sold cotton-candy products like weather futures, and it relied on industrial sabotage to make its fantasy profit targets.
Keynesianism was a collection of ideas that grew up as a response to the fundamental
dilemma of the industrial age. Simply put, if you want to build something very
difficult (like the automobile) you can only justify the expense of the tools
if you have a LOT of customers. Industrialization could produce virtually unlimited
and very sophisticated goods if the economists could arrange for unlimited customers.
So the Keynesians spent most of their time working on ways to increase the purchasing
power of the greatest possible number of consumers. (There were other variations
of these principles in other parts of the world but in the English-speaking countries,
they came to be associated with John Maynard Keynes largely because he wrote
about them so clearly and effectively. Ironically, of all the industrialized
nations, Keynesianism was probably least successful in England for a host of
Keynes staked out a centrist economic position. The laissez faire economists taught that all economic activity should be private and unregulated and that all useful information came from the markets. The Marxists taught that everything should be regulated, centrally planned, and collectively owned. There was an amazing amount of intellectual space between these two extreme positions. And so Keynesianism became this sprawling doctrine the believed that markets were important but had to be regulated to keep them from destroying themselves, that there was plenty of room for private initiative AND central planning, and there must be public AND private investment and ownership.