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The U.S. auto industry bailout and some inconvenient truths.

December 8th, 2008 · Greg Atkinson · 4 Comments

There is no doubt that the U.S. auto industry will receive some form of government assistance, however the real story is not the about the bailout itself, but rather what the bailout tells us about the U.S. economy in general. After all, how can U.S. car makers be struggling so badly when they are sitting in the middle of biggest market in the world for auto-mobiles?

There are two views or versions of the American economy. One is the version that the U.S. likes to convey to the world and it is also the one American’s like to believe in. In this version, the United States is the most powerful nation the world has even seen, has the most efficient workers, a robust economy and is the world’s number one citizen.

The other version is closer to the truth and most Americans do not want to talk about it, but the failure of a few major financial institutions and the dire straights the auto industry finds itself in will make American’s face a few inconvenient truths. This second version is that the U.S. is the biggest but not the best economy, has benefited from the misfortune of other nations and did not make it to the top solely due to it’s own abilities.

After World War Two the United States was the undisputed number one economic power on the planet and many American’s would say they defeated both Germany and Japan almost single-handedly. In the decades that followed American’s became richer and their quality of life soared. However the main reason America became the dominant economic power was not because the U.S. economy was the best, but because all of  it’s main economic rivals had been crippled by the war.

In particular Germany had been ruthlessly bombed by the allies and Japan had seen it’s major cities levelled by what even Robert S. McNamara admitted later, was a strategic bombing campaign that would have been considered a war crime if the U.S. had lost the war. Most of Europe was in ruins and the Soviet Union had lost an estimated 40 million people during the war with most of it’s major cities also devastated during the conflict.

These simple facts are often overlooked and lead us to the first inconvenient truth about the U.S. economy and that is the United State is not the world’s most efficient or best economy; it has just received an amazingly good head start over other nations after World War Two.

While most major economic powers spent the 50’s and 60’s rebuilding devastated cities and industries, (often with U.S. assistance it should be noted) Americans during the same period expanded already existing industries, prospered and enjoyed the “baby boom” period. If global economic competition was a 200 metre hurdle race, then the U.S. started 50 metres ahead of the other competitors and with less hurdles to jump to the finish line.  In addition most of the other competitors were limping badly having being injured in previous races.

However U.S. politicians kept telling American’s how good they were and American’s loved to hear it, but now with the auto industry on the brink of collapse people are suddenly starting to wonder how it all happened. After all, if you have the world’s biggest economy, the world’s best workers and the world’s most productive industries how can you possibly end up with three big auto makers in such a bad state? (It’s even worse if you consider Chrysler has been helped out before back in 1979)

The reason for the mess can largely be put down the the second inconvenient truth: American’s are overly sensitive to criticism.

Most people outside the U.S. would agree with me when I say that American’s tend to get a touch agitated if even fairly mild criticisms are levelled against the U.S. of A. This behaviour is even displayed at the most senior levels of government as demonstrated by Donald Rumsfield’s (Secretary of Defense) angry reaction and verbal barbs directed towards Germany and France because of their criticism of U.S actions in Iraq a few years ago.

To be fair, Americans do take great pride in their country and this is a noble virtue, but pride can be taken too far and prevent people assessing situations correctly.

Again if we look at the U.S auto industry we see this inconvenient truth at work. If imitation is the greatest form of flattery then going off in another direction is a slap in the face. Didn’t the executives at the U.S. auto makers notice for example that Toyota was gaining market share by not making cars like Ford, General Motors and Chrysler?

My guess is that did notice this of course, but believed they were on the right path and thought they knew the U.S. market better than Toyota. However they failed to see the Toyota designed cars for what they really were: a criticism of the way the U.S. auto makers designed and manufactured auto-mobiles. If they has taken this criticism on-board a decade ago they would be in a much better position today.

The final inconvenient truth is that the U.S. is in decline and slowly losing it’s crown as the world’s undisputed number one economic power. This does not mean the country will not recover from this current economic mess, but it does mean that as this century evolves the U.S. will need to start paying the bills for years of excessive living.

This not a criticism, all great nations eventually enter a period of decline but they can still play an important role in the world. Times will be good again for America, but it will need to keep looking over it’s shoulder in the years ahead as other nations hit their stride in the 21st century.

4 responses so far ↓

  • 1 Ned S // Oct 21, 2009 at 6:16 pm

    The US were johnny come latelies to WWI – Got there just in time to settle it one way or the other (depending who they picked – and then share in the slicing up of the world at the treaty of Versailles) – After the Imperial powers had bled themselves white. And may well have been planning on playing the same game in WWII??? – Except Tojo stuffed up and did the Pearl Harbour thing! 🙂

    WWI and II weren’t good for the old powers. The US emerged big winners. If they are smart they should be trying to figure out how the CIA can convince China and India to go at it hammer and tongs perhaps? (And even drag in the Russkies somehow maybe???) And sell guns to any silly buggers [and their allies] that fall for the bait.

    Nip China and India in the bud – Don’t let them get to be serious contenders for the crown – Not like the US was back at the time last century that lots of European powers were feeling flushed with success and real ready to sort out those other buggers that were getting too big for their boots – To their mutual and eventual self minimization.

    But hey, I’m a cynic … It just could be that the Yanks truly are a wonderful mob of caring and sharing human beings who are suffering from the guilts over having way too much for any one nation and just want to see the bounties of the world’s resources and productivity shared out between all and sundry – With their regular mentions of their hydrocarbon and other interests in all the varied regions of the globe being a clever ploy to disguise their genuinely humble and self-effacing desire to make us all better – Namely, more like them! 🙂 🙂 🙂

  • 2 Greg Atkinson // Oct 21, 2009 at 9:36 pm

    Ned S – the sad part is that few major western nations have really stood up to the U.S. and asked why dropping napalm all over Vietnam was good but Iraq owning a few outdated missile launchers was bad. I guess the French and Germans did raise some noise but they seem to be toeing the line in Afghanistan where the U.S (and allies) are fighting “terrorists” who used to be freedom fighters when they were up against the Soviet Union. Are you confused..I am 🙂

  • 3 Ned S // Oct 22, 2009 at 4:51 pm

    This is an interesting read – If there is any truth in it? The Taliban get a brief mention at the end:

  • 4 Ned S // Oct 22, 2009 at 8:02 pm

    It sure makes an interesting contrast to the version prepared for American home consumption:

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