From: Travis Subject: A Fateful Turn Date: Thursday, December 4, 2008,
*A Fateful Turn **The New American Command-and- Control Economy *by Jacob Steelman America is about to make another fateful turn toward a command-and- control economy from which it will become much more difficult to return. Political commentators and pundits are putting pressure on Congress by forecasting the demise of the Republican Party in Ohio, Michigan and much of the industrial Midwestern part of the United States if GOP members of Congress do not vote with Democrats to bail out the US automakers, General Motors, Ford and Chrysler, with $34 billion of taxpayers' money. Detroit's lobbyists are working hard to get the bail out money for their clients. Tens of thousands of jobs, if not millions, will be lost we are told unless there is a bail out. This is the standard argument put forth by government lobbyists and their media lackeys in their effort to scare the people and politicians into believing that thousands of jobs (translated into political terms – votes) will be lost if such inefficient industries are not protected by the government from the effects of competition. The culprit is free trade says Pat Buchanan, the conservative columnist and former Nixon speech writer; other pundits blame it on the greedy oil companies. The effects of years of government intervention in the auto industry and the economy are ignored. Ignored also is the fact that automakers from overseas (for example Toyota, BMW, Kia) with plants in the United States have not been seeking a bail out. The arguments for bailouts and protectionist legislation have always been the same – to protect from the rigors of the marketplace industries that are failing or just starting up. In other words the government should intervene to change consumer preferences being reflected in the marketplace. Protect the buggy whip manufacturers from the competition of automobiles, protect the railroads from airlines, protect industries from foreign competition, protect consumers from alleged hazards of mobile phones, etc. – the list goes on and on and on. As silly as it now seems there was once created a fear of the electric light bulb as it began to replace gas lighting around the turn of the century. Large placards were often displayed in hotel rooms warning of the dangers from these new electric light bulbs. The underlying premise of all this protectionism is that the consumer is too stupid to know what he or she wants and too stupid to make informed decisions on the basis of each consumer's needs and value judgments. These are the same consumers who on Election Day are said by the politicians to be so intelligent at having voted for this candidate or that candidate. But the day after the election these previously brilliant consumers are found to be so wanting in intelligence as to have voted in the marketplace for a product or service other than one said by the politicians to be vital for the economy or national interest. Thus the government is required to intervene in the marketplace to alter the preferences of these consumers who are now treated as if they are wards of the state. This will be the future of the marketplace in the United States as the government takes over more and more industries (we are talking entire industries, not merely one isolated company within an industry) with its bailouts (i.e. nationalizations) and the US becomes a command-and- control economy (also called socialist, fascist or communist economy). The government has already taken over the financial industry and soon will takeover the US-based automobile industry. The total costs of the bailouts to date are now estimated to be $7.7 trillion. What industry will likely be next and what will be the total cost of the bailouts? The governor of California is foreshadowing California's financial demise and the need for $26 billion of federal funding of infrastructure projects in the state. How will this all end? The structure of this new expanded American command-and- control economy apparently is to be similar to the fascist economy of Italy adopted by the dictator Benito Mussolini, empire builder and ally of Adolph Hitler and the fascist Nazi (National Socialist) Germany. Under fascism the companies maintain their corporate identities and names while the government provides the capital and owns (and controls) the underlying assets of the company. Thus, the appearance of a private market economy exists while in fact the government owns the means of production and distribution. Like fascist Italy this American command-and- control economy will be directed at the point of a gun by politicians and bureaucrats (if you do not believe me resist to the *nth* degree paying your taxes or complying with a government regulation and see what happens when the police show up at your home to take you away). Political pull and power will become the new "capital" as certain individuals, interest groups, unions and companies jockey for position to promote themselves and thwart their competitors in this government-directed society and economy. A vivid depiction of life in such a world is set out in Ayn Rand's timeless classic *Atlas*<http://www.amazon.com/Atlas-Shrugged-Centennial-Ed-Hc/dp/0525948929/lewrockwell> *Shrugged*<http://www.amazon.com/Atlas-Shrugged-Centennial-Ed-Hc/dp/0525948929/lewrockwell> . For example, long a thorn in the side of the US banking cartel, headed by the Federal Reserve, Wall Street investment banking has been wiped out by the Fed's and Treasury's takeover of the industry through a combination of bail outs, pre-packaged bankruptcies or forced mergers and conversions of investment banks into the banking cartel. The US-based auto industry is soon to be taken over by the government in the United States (GM and Ford are also both seeking bail outs of their local manufacturing entities in Sweden and Australia). The opportunity of the majority party in Congress to solidify its power base in Michigan, Ohio and the industrial Midwest is too tempting not to bail out the industry. The US-based auto industry has been losing market share to overseas automakers since the 1960s as the foreign imports became widely accepted and demanded by American consumers. At first they were derided as a novelty – funny little cars. As David Halberstram<http://www.amazon.com/Reckoning-David-Halberstram/dp/0380721473>described it the US automakers willingly opened their doors to the Japanese automakers' research teams so confident were they that the Japanese and their little cars would never be a competitive threat. Detroit's denial continued as the Japanese continued to increase their share of the American car market. The funny little cars then became recognized as well-built fuel-efficient cars which filled a niche in the American car market. Companies such as Toyota were predominantly truck manufacturers during World War II and shifted to automobile manufacturing following the war. Given the conditions of Japanese roads the trucks were required to be well-built to withstand the rigors of travel and transport within the country as well as for the military. This manufacturing expertise followed in the construction of their automobiles and became recognized by the American consumer along with their styling and fuel efficiency. The American-based car manufacturers struggled to build a competitive small car. The oil shocks of the 1970s caused American consumers to demand more efficient cars which the Japanese were now exporting to America in ever-increasing numbers. The US-based automobile industry experienced severe stress – American Motors (with its Jeep line) merged with France's Renault in the late 1970s and was later acquired by Chrysler in 1987. Chrysler, through its new head and master salesman Lee Iacocca, had to seek a federal bailout in September of 1979 which was approved by the government and signed into law by then President Jimmy Carter on January 7, 1980. The quality of cars being produced by Chrysler were such that it should have gone out of business, which of course would have been competitively better for GM and Ford (and perhaps as well for the American Motors-Renault combination) and increased their financial strength. Instead the politicians decided that one weak automobile manufacturer and two or three somewhat weaker auto manufacturers were better for the economy and the United States (in reality better for certain politicians' reelections) . The government's action also sent the signal to both GM and Ford (and presumably American Motors-Renault as well) that in the event of severe financial stress the US government would bail them out. This inefficiency is the inevitable result of an interventionist economy run by politicians and their appointed bureaucrats rather than a consumer-directed laissez faire economy run by consumers and their agents – private unfettered entrepreneurs and businesses. By the 1980s the strong US dollar and demand for imports increased the imports of overseas cars from Japan as well as from Korea and Germany. The subsequent reaction was a wave of protectionism which resulted in the larger exporters such as Toyota and BMW building their own manufacturing facilities in the United States especially in the southern part of the US where labor laws were much less burdensome on employers. Toyota opened its first US plant in 1982 as part of a joint venture with GM, setting up manufacturing in a GM plant in California which previously had been closed. No amount of political fixing can hide the fact that the US-based auto industry is not efficient and hence not competitive due to a multitude of political interventions (i.e. the moral hazard from the Chrysler bail out, labor laws, environmental laws, emissions standard, restrictions on oil exploration and production, seat belt laws, etc.). Such government intervention when coupled with management's failure to fully appreciate competitive global market forces until it was too late and management's knowledge that they were "too big to fail" has resulted in the US-based industry being reduced to its present state of financial collapse. The hourly rate (including health care costs) of US auto workers is just shy of $75 versus less than $45 per hour for auto workers at Toyota's US manufacturing plants. The foreign car companies with manufacturing facilities in the US account for over 54% of the US car market but employee only 113,000 workers compared to GM, Ford and Chrysler who employ almost 240,000 workers. Thus it is not surprising that such inefficiency coupled with the overall stress in the global automotive marketplace as a result of high oil prices (actually depreciating value of the US dollar due to the Fed's long-continued inflationary policies) that the US-based automotive industry is teetering on the verge of bankruptcy. One can only speculate on the outcome to GM and Ford had the government not intervened and bailed out Chrysler in 1980. Having made a bad decision regarding Chrysler the politicians will likely make another bad decision by bailing out GM and Ford as well as Chrysler. Once again the American taxpayer will be required at the point of a gun to bail out another government-created mess. By continuing to prop up inefficient industries through government bail outs and nationalizations the US is soon to become a nation of much less efficient producers in the world market. At some point in time some or all of these companies or their assets will need to be liquidated, combined, sold off or re-privatized. This process is likely to become highly contentious as the various conflicting political interests intervene to challenge sales of various assets, layoffs and plant closings. This is what the consumers in the United States have to look forward as the command-and- control economy becomes more pervasive in the United States – politicians and bureaucrats allocating capital to borrowers and managing the operation of the nationalized banking system, politicians and bureaucrats overseeing and managing the operation of the nationalized automobile industry and other inefficient businesses contrary to the demands of consumers. This is in addition to the state-owned enterprises such as the Tennessee Valley Authority, the US Postal Service, the public education system, and Amtrak among the most obvious. We only have to look back in history at the former Soviet Union to know how this ends up in the extreme – an entire command-and- control economy consisting of inefficient businesses whose products are in demand nowhere in the world except in some other inefficient socialist or communist backwater. If President – elect Obama truly wants change then he should embrace changing to a free market economy – withdraw from Iraq and Afghanistan, reduce military and other expenditures, rescind the bail outs, eliminate federal agencies and their bureaucrats, drastically reduce regulations, drastically reduce taxes, eliminate the Federal Reserve and fractional reserve banking, restore the gold standard and restore private free banking. Rather than another advisory board should the new President need advice on the economy he need only contact the Mises Institute <http://mises.org/>with its large resource base of books and articles on Austrian economics. I recommend he read Henry Hazlitt's *Economics In One Lesson*<http://www.mises.org/store/Economics-in-One-Lesson-P33.aspx?AFID=14>to get a broad understanding of Austrian economics and what is required to get American economy out of this current substantial market correction. If Americans want to avoid this fateful turn toward a command-and- control economy and the lower standard of living that will result from such an economy then they must reject government intervention in the economy and their lives. They must rid America of destructive government regulations, rid America of government spending on bail outs, empire building, overseas military adventures and other programs and rid America of central bank control of the monetary system and restore a private free banking system. Otherwise Americans have to look forward to a highly inefficient command-and- control economy run by the politicians and bureaucrats rather than private consumers in a free and highly efficient market. http://www.lewrockw ell.com/orig9/ steelman7. html<http://www.lewrockwell.com/orig9/steelman7.html> __._,_.___ Messages in this topic <http://groups.yahoo.com/group/tsowell/message/5450;_ylc=X3oDMTM0c2M2aDlxBF9TAzk3MzU5NzE0BGdycElkAzQzNDQyNTUEZ3Jwc3BJZAMxNzA1MDYwMzc1BG1zZ0lkAzU0NTAEc2VjA2Z0cgRzbGsDdnRwYwRzdGltZQMxMjI4NDU3MDA5BHRwY0lkAzU0NTA-> (1) Reply (via web post) <http://groups.yahoo.com/group/tsowell/post;_ylc=X3oDMTJwY2lmMmZoBF9TAzk3MzU5NzE0BGdycElkAzQzNDQyNTUEZ3Jwc3BJZAMxNzA1MDYwMzc1BG1zZ0lkAzU0NTAEc2VjA2Z0cgRzbGsDcnBseQRzdGltZQMxMjI4NDU3MDA5?act=reply&messageNum=5450>| Start a new topic <http://groups.yahoo.com/group/tsowell/post;_ylc=X3oDMTJlc3BqbDQxBF9TAzk3MzU5NzE0BGdycElkAzQzNDQyNTUEZ3Jwc3BJZAMxNzA1MDYwMzc1BHNlYwNmdHIEc2xrA250cGMEc3RpbWUDMTIyODQ1NzAwOQ--> Messages<http://groups.yahoo.com/group/tsowell/messages;_ylc=X3oDMTJlbGFyMzQyBF9TAzk3MzU5NzE0BGdycElkAzQzNDQyNTUEZ3Jwc3BJZAMxNzA1MDYwMzc1BHNlYwNmdHIEc2xrA21zZ3MEc3RpbWUDMTIyODQ1NzAwOQ-->| Files<http://groups.yahoo.com/group/tsowell/files;_ylc=X3oDMTJmbTlzNmYyBF9TAzk3MzU5NzE0BGdycElkAzQzNDQyNTUEZ3Jwc3BJZAMxNzA1MDYwMzc1BHNlYwNmdHIEc2xrA2ZpbGVzBHN0aW1lAzEyMjg0NTcwMDk->| Photos<http://groups.yahoo.com/group/tsowell/photos;_ylc=X3oDMTJldGxxMGlrBF9TAzk3MzU5NzE0BGdycElkAzQzNDQyNTUEZ3Jwc3BJZAMxNzA1MDYwMzc1BHNlYwNmdHIEc2xrA3Bob3QEc3RpbWUDMTIyODQ1NzAwOQ-->| Links<http://groups.yahoo.com/group/tsowell/links;_ylc=X3oDMTJmZTA4MnZuBF9TAzk3MzU5NzE0BGdycElkAzQzNDQyNTUEZ3Jwc3BJZAMxNzA1MDYwMzc1BHNlYwNmdHIEc2xrA2xpbmtzBHN0aW1lAzEyMjg0NTcwMDk->| Database<http://groups.yahoo.com/group/tsowell/database;_ylc=X3oDMTJjc3VkOGwxBF9TAzk3MzU5NzE0BGdycElkAzQzNDQyNTUEZ3Jwc3BJZAMxNzA1MDYwMzc1BHNlYwNmdHIEc2xrA2RiBHN0aW1lAzEyMjg0NTcwMDk->| Polls<http://groups.yahoo.com/group/tsowell/polls;_ylc=X3oDMTJmNjJpbWlhBF9TAzk3MzU5NzE0BGdycElkAzQzNDQyNTUEZ3Jwc3BJZAMxNzA1MDYwMzc1BHNlYwNmdHIEc2xrA3BvbGxzBHN0aW1lAzEyMjg0NTcwMDk->| Members<http://groups.yahoo.com/group/tsowell/members;_ylc=X3oDMTJlNmxxdnBzBF9TAzk3MzU5NzE0BGdycElkAzQzNDQyNTUEZ3Jwc3BJZAMxNzA1MDYwMzc1BHNlYwNmdHIEc2xrA21icnMEc3RpbWUDMTIyODQ1NzAwOQ-->| Calendar<http://groups.yahoo.com/group/tsowell/calendar;_ylc=X3oDMTJkbWpwbG0yBF9TAzk3MzU5NzE0BGdycElkAzQzNDQyNTUEZ3Jwc3BJZAMxNzA1MDYwMzc1BHNlYwNmdHIEc2xrA2NhbARzdGltZQMxMjI4NDU3MDA5> MARKETPLACE ------------------------------ >From kitchen basics to easy recipes - join the Group from Kraft Foods <http://us.ard.yahoo.com/SIG=13rngj1vu/M=493064.12016295.13271503.10835568/D=groups/S=1705060375:MKP1/Y=YAHOO/EXP=1228464209/L=/B=b0ubJULaX9g-/J=1228457009684171/A=5530388/R=0/SIG=11nuutlas/*http://explore.yahoo.com/groups/kraftmealsmadesimple/> [image: Yahoo! 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