Monday, September 05, 2011

The Lexus: A triumph of socialism

First, let's talk about the stimulus. Propagandists have convinced many that Obama tried a "socialist" approach which failed. But -- as even David Frum has pointed out --
Americans wonder: "Where's our Hoover Dam? Where's our East River Drive?"
Frum raises a fair point: What did we get for the stimulus outlay?

In fact, the stim package was much smaller than most believe. Propagandists have misled the public into confusing the stimulus with the much larger bank bailout, which was and is unpopular.

From an excellent piece by "albrt" in Corrente and Kos:
The most visible effect of the 2009 Obama stimulus package was to discredit the idea that the government in general, and the Obama administration in particular, could do anything effective about the economy.
President Obama believes the federal government literally cannot create jobs in any meaningful way:
So when I took office, I put in place a plan -- an economic plan to help small businesses. And we were guided by a simple idea: Government can’t guarantee success, but it can knock down barriers to success, like the lack of affordable credit. Government can’t replace -- can’t create jobs to replace the millions that we lost in the recession, but it can create the conditions for small businesses to hire more people, through steps like tax breaks.

That’s why we cut taxes for small businesses eight times.
Yet small business is in a bad way, due to lack of demand. (Not due to over-regulation, although the propagandists would have you so believe.) Moral of the story: Tax cuts don't work. Tax cuts don't work. Tax cuts don't work.

Nevertheless, much of the stim package went to tax cuts. Another big chunk went to keep the hard-hit states afloat. Another big chunk went to keep unemployment checks rolling. Very, very little went to the creation of jobs.

"Socialism"? Hardly.

Do you remember the phrase "shovel-ready"?

In late 2008 and early 2009, there was much discussion of the need for "shovel-ready" jobs on which to spend the stimulus money. The phrase indicated that Obama wanted to spend only on temp solutions, not on long-term job creation.

Ultimately, the only jobs that were "shovel-ready" involved infrastructure maintenance, which needed doing anyways. There was no new TVA or WPA or Hoover Dam or anything like that.

Why the emphasis on "shovel-ready" employment? Because anyone in government who thinks in the long term will be damned as a godless Bolshie.

If that's the case, then the Lexus is a MarxMobile.

Whenever the words "socialist" and "automobile" appear in the same sentence, people usually picture ugmo vehicles like the Lada or the Yugo. They don't think about the Lexus.

Newsflash: Toyota and the other Asian auto giants would not be what they are today without what the tea partiers would call "socialism."

Of course, back in the day, few used that term as freely as people do nowadays. "Socialism," in the 1950s, had a more restrictive meaning: The word usually referred to a direct government takeover of the means of production. It did not refer to government partnership -- direct or indirect -- with a private enterprise.

Toyota used to make looms. They still do. Without "socialism" (in quotes), the company might be doing little else. More likely, Toyota would be non-existent.

According to Wikipedia, sale of a loom patent to a British firm gave Toyota, then called Toyoda, the start-up capital to get into the auto business. They came out with their first car in 1936.

The libertarians would have you believe that the story ends there. But there's more.

Toyota was not a particularly successful car-maker at first. The product was sold only in the domestic market. Everyone laughed at the idea of marketing a Japanese car in the United States. If you are as old as I am, you can recall a time when "Made in Japan" was synonymous with "Cheap crap."

In the 1950s, Japan was in severe straits, having just come out on the wrong end of a big, bad, expensive war. The country did not have a whole lot of natural resources. But the Japanese had one huge advantage: Nobody making decisions gave a fuck about anything said by the disciples of Ayn Rand, Milton Friedman, or Friedrich Hayek.

The Japanese government decided that they had to think long-term. Forget "shovel-ready."

The story is best told by Ha-Joon Chang in his book Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism.
Once upon a time, the leading car maker of a developing country exported its first passenger cars to the US. Up to that day, the little company had only made shoddy products – poor copies of quality items made by richer countries. The car was nothing too sophisticated – just a cheap subcompact (one could have called it ‘four wheels and an ashtray’). But it was a big moment for the country and its exporters felt proud.

Unfortunately, the product failed.Most thought the little car looked lousy and savvy buyers were reluctant to spend serious money on a family car that came from a place where only second-rate products were made. The car had to be withdrawn from the US market. This disaster led to a major debate among the country’s citizens.

Many argued that the company should have stuck to its original business of making simple textile machinery. After all, the country’s biggest export item was silk. If the company could not make good cars after 25 years of trying, there was no future for it. The government had given the car maker every opportunity to succeed. It had ensured high profits for it at home through high tariffs and draconian controls on foreign investment in the car industry. Fewer than ten years ago, it even gave public money to save the company from imminent bankruptcy. So, the critics argued, foreign cars should now be let in freely and foreign car makers, who had been kicked out 20 years before, allowed to set up shop again.

Others disagreed. They argued that no country had got anywhere without developing ‘serious’ industries like automobile production. They just needed more time to make cars that appealed to everyone.

The year was 1958 and the country was, in fact, Japan. The company was Toyota, and the car was called the Toyopet. Toyota started out as a manufacturer of textile machinery (Toyoda Automatic Loom) and moved into car production in 1933. The Japanese government kicked out General Motors and Ford in 1939 and bailed out Toyota with money from the central bank (Bank of Japan) in 1949. Today, Japanese cars are considered as ‘natural’ as Scottish salmon or French wine, but fewer than 50 years ago, most people, including many Japanese, thought the Japanese car industry simply should not exist.
However, the fact is that, had the Japanese government followed the free-trade economists back in the early 1960s, there would have been no Lexus. Toyota today would, at best, be a junior partner to some western car manufacturer, or worse, have been wiped out. The same would have been true for the entire Japanese economy. Had the country donned Friedman’s Golden Straitjacket early on, Japan would have remained the third-rate industrial power that it was in the 1960s, with its income level on a par with Chile, Argentina and South Africa – it was then a country whose prime minister was insultingly dismissed as ‘a transistor-radio salesman’ by the French president, Charles De Gaulle. In other words, had they followed Friedman’s advice, the Japanese would now not be exporting the Lexus but still be fighting over who owns which mulberry tree.
(Those who decry the recent bailout of General Motors never tell you that Toyota once received a similar aid package.)

We are now in bad straits. Not just America: The entire world. The virus of neo-liberal economic thinking has thrust us into a new Depression.

In order to get out of this ditch, we need to start thinking the way Japan thought in the 1950s. Alas, the national ideology -- and our fear of "socialism" -- prevents us from doing so.

Suppose that, instead of concentrating on the "shovel-ready," Obama had told the country: "We are going to invest our resources in a Great Whatzit. And we are going to work with private enterprise to create this Whatzit." The Whatzit might have been a high-tech source of alternative energy, a new type of car, massive infrastructure investment, faster-than-light spaceships, chewing gum that gives people orgasms -- anything. As long as the result was plenty of American jobs, I would have been pro-Whatzit.

What would have happened had we embarked on a great Whatzit adventure?

Well, we would have heard shrieks of "Socialism!" from the Randroids and the Murdochians. Of course, we heard those shrieks anyways -- so, like, same diff.

Night after night, the talking heads on Fox News would have denounced the Whatzit as a boondoggle. No matter how efficiently the enterprise was run, they would scream about all the wasted money.

Remember, Toyota came out with its first car in 1936 and did not have an internationally successful product until the 1960s. A Whatzit cannot succeed unless the people running Whatzit Inc. are allowed to think long term. Often, they can't think that way unless Uncle has their back.

Unfortunately, laissez-faire capitalists increasingly do not, cannot think long-term.

One of the main lessons we glean from the many books about the Wall Street debacle is that the people running AIG and the great investment houses made decisions that endangered their firms. Why should they have cared whether the firms survived? As long as you are able to stash a few hundred million in an off-shore account now, why think about whether your company survives another five or ten or twenty years?

The same problem assails what is left of American manufacturing, as this remarkably good piece in Naked Capitalism demonstrates.

We need a government that has the ideological breathing room to set a goal, to decide what America's next Great Whatzit will be. The Randroids and the Freidmanites always tell us that government cannot do this. They are wrong. The capitalists have proven that they cannot think ahead.

Politicians must work with capitalists, and all parties must think long term. If a product fails -- and those initial Toyota products failed spectacularly -- everyone must keep trying.

More than that: There must be political control of the company owners and managers. Obscene CEO compensation must be tamed. Managers and owners cannot be allowed to bleed the firm dry for a quick personal profit. The purpose of a business enterprise is to create goods and services and to provide jobs over the long term -- not to give sharks an excuse to make a quick kill.

Can we do this? Of course. Japan did it. So did Germany. That's why the Germans are selling a bunch of really well-made high-end stuff to China.

Only one thing is stopping us: Ideology.

The libertarian conspiracy is killing us.
Japan may have shown long-range strategy in supporting Toyota, but by the 1990s, they made the same mistakes the US is making now in failing to provide adequate stimulus.

Japan suffered a "lost decade" of subpar economic progress, and we appear doomed to follow the same trajectory.
We've become an instant gratification/results society. Rather than long term steadily growing investments stock holders want to play like they are at a table in Monte Carlo. The government can curb this by tying tax rates to the length of time an investment is held. Hold a block of stack long enough and pay zero capital gains when you sell.

When was the last time you heard "Five year plan"? Everything today is based on how good the money rolled in last quarter.
McLuhan: You cannot separate the message from the medium that delivered it.

Information is the medium it comes out of.

The Medium is the Message.

You are writing a blog, not a newspaper editorial. The two are different mediums. The old media cannot keep up with the inventiveness of the new media.


I'll get you yet.

See my 9-11 memorial on the URL here. Please.
Toyota is still in the loom business.

Built the first loom capable of weaving an a-pillar from carbon fiber.


As far as looms go.

I actually got into a twitter discussion with someone accusing Obama of socialism. When I asked him to actually "explain" what he meant he stopped responding to me.

Obots on the other hand, don't know how to shut up.
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