by Russ Roberts on March 30, 2009

in Man of System

 It's worse than I thought. I hope to go over this in more detail but here are the President's remarks on the auto industry. Horrifying. One low light:

It is my hope that the steps I am announcing today will go a long
way towards answering many of the questions people may have about the
future of GM and Chrysler. But just in case there are still nagging
doubts, let me say it as plainly as I can — if you buy a car from
Chrysler or General Motors, you will be able to get your car serviced
and repaired, just like always. Your warrantee will be safe.

fact, it will be safer than it's ever been. Because starting today, the
United States government will stand behind your warrantee.

There are many other scary things in the speech. The pronoun "my" appears way too often. Zero would be the right number. Adam Smith, where are you?

man of system, on the contrary, is apt to be very wise in his own
conceit; and is often so enamoured with the supposed beauty of his own
ideal plan of government, that he cannot suffer the smallest deviation
from any part of it. He goes on to establish it completely and in all
its parts, without any regard either to the great interests, or to the
strong prejudices which may oppose it. He seems to imagine that he can
arrange the different members of a great society with as much ease as
the hand arranges the different pieces upon a chess-board. He does not
consider that the pieces upon the chess-board have no other principle
of motion besides that which the hand impresses upon them; but that, in
the great chess-board of human society, every single piece has a
principle of motion of its own, altogether different from that which
the legislature might chuse to impress upon it. If those two principles
coincide and act in the same direction, the game of human society will
go on easily and harmoniously, and is very likely to be happy and
successful. If they are opposite or different, the game will go on
miserably, and the society must be at all times in the highest degree
of disorder.

Tell your children what's going on so they will know there is another view when 20 years from now they're told that the collapse of the auto industry and all that went wrong in its aftermath obviously proves that markets don't work and we can't rely on private
decisions motivated by profits.

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DAVE March 30, 2009 at 12:15 pm

So, Dr. Roberts, are we there yet?

DAVE March 30, 2009 at 12:15 pm

Or are we still "on the way"?

Crusader March 30, 2009 at 12:22 pm

The time to really panic will be when Obama decides it's time to start pressuring profitable companies like Intel, Microsoft, AMD, Nucor, etc… He'll say that "the hitech industry is too important to the national interest to leave it at risk in private hands" and the government will nationalize whole industries(hi-tech, pharma, auto, steel, oil, etc..). It's coming.

geo from va March 30, 2009 at 12:29 pm

Great universal car care.

No one will believe this, GM dealers wont' be able to give cars away.

Remember we're still in the beginning stages of 4yrs of this, so the question I'd like to know is as these policies fail will this govt become more drastic and tyrannical, or will they just kinda fumble along for 4 more years.

Steve March 30, 2009 at 12:35 pm

It will be a good fight, but facts are stubborn things. Let's keep our arguments focused on the merits. Although I am only a Hayekian acolyte, I have almost three years of EconTalk under my belt – so bring it on!

Crusader March 30, 2009 at 12:35 pm

geo from va – based on the Newsweek cover – "A guide to populist rage", it seems the American mood is pro-tyranny right now.

Mark March 30, 2009 at 12:35 pm

I highly reccomend you all watch last week's episode of South Park titled "Margaritaville." The episode is an allegory to the economic crisis and satirizes the government's means of descision making in regards to providing bailout funds to private organizations. Hint: it involves a dead chicken and a guy in a suit playing a kazoo.

Randy March 30, 2009 at 12:45 pm

You know, I might consider buying a car from GM or Chrysler in bankruptcy (not likely, but I might). But there is no way that I would consider for a single second buying a car made by the US government.

indiana jim March 30, 2009 at 12:49 pm

There is a good argument to be made that the worse it gets now, the greater the number of rabid socialists will be ousted from Congress in the 2010 mid-terms. This and other blogs that present the case of liberty may prove instrumental in educating the public about what is at stake in the 2010 mid terms.

So I am not as pessimistic as Russ in thinking that we have to wait decades before there will be an opportunity for major push back against the socialistic tsunami currently eroding liberty.

Dallas March 30, 2009 at 12:51 pm

I can see GM giving bumper to bumper warranty for 10 years at taxpayers expense. Perhaps they could include all maintenance cost and even gasoline cost. That would allow them to sell their cars.

MnM March 30, 2009 at 12:57 pm

In fact, it will be safer than it's ever been. Because starting today, the United States government will stand behind your warrantee [sic, should be warranty].

Hello Moral Hazard, my old friend!

I wonder what the unintended consequences of this will be. Exactly how is the government going to back these up? Will they simply reimburse GM for the repairs. I hope not or we're going to see a lot of unneeded repairs.

I love the Smith quote, Russ. I would add to it:

The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.

Freddy March 30, 2009 at 12:58 pm

2010 cannot come fast enough…

kebko March 30, 2009 at 1:37 pm

I'll second the recommendation for last week's South Park. It was a half hour of hilarious sanity. Everyone here would find it agreeable (pronounced a-gree-a-ble).

geo from va March 30, 2009 at 1:43 pm

how do you say that and not get nailed by the WTO?
isn't that a govt subsidy?

Paul M. Sark March 30, 2009 at 2:29 pm

1) Only business can run business!
2) Government is evil!
3) Governement can't even run wars!
4) Only business can run wars!
5) Let the businessmen run the wars!

Crusader March 30, 2009 at 2:33 pm

Looking at how inept the Republicans were with their "budget proposal", it's safe to say that the Democrats will be smiling after 2010 as well.

vikingvista March 30, 2009 at 2:56 pm

"there is no way that I would consider for a single second buying a car made by the US government."

But the government is making you prepay for part of it. Are you going to refuse Medicare because it is government financing? What about the 2.9% + compounded interest of all wages you've ever made that were taken from you to pay for this program? Similar for social security, only probably costing you hundreds of thousands of dollars more. Similar for public schools.

I appreciate your sacrifice, but most people are not able to afford being forced to pay for government products, and also choose to pay a second time for private products.

In fact, by not buying a government car, you may actually be assisting the government. Unlike profitable ventures, government programs lose more money the bigger they are. So, by paying your taxes into the government car industry, but not partaking of the products of that forced payment, you would be helping to make the government car industry more solvent.

Government programs rarely go away. If you want to make a moral choice against these programs, probably your best bet would be to do what you can to contribute to its inevitable bankruptcy.

In other words, the moral fight against government programs may be to use them to the greatest extent possible while simultaneously denouncing and trying to end them.

Randy March 30, 2009 at 3:02 pm

Paul Sark,

"Let the businessmen run the wars!"

I agree. Either there would be less wars and/or they wouldn't be any of my concern.

Randy March 30, 2009 at 3:05 pm


My concern with a government made car is not so much moral as practical. I suspect it will be something like the Yugo. Call it the Amerigo. It will have a big battery, a little engine, a solar array on the roof, and be completely safe – and I do mean "completely" safe – as in it will do zero to sixty in about 20 minutes.

save_the _rustbelt March 30, 2009 at 3:05 pm

I'm guessing there is a broader agenda here.

Obama wants to take the auto makers to the brink, pack the boards, and turn the companies into labs for his "greenie" friends.

I hope all of you like small ugly cars with inadequate power.

Phil March 30, 2009 at 3:06 pm

I'll know we've turned the corner when its "cool" and safe to make a movie called "O", ala "W" .

anon March 30, 2009 at 3:08 pm

"Are you going to refuse Medicare because it is government financing?"

You cannot refuse Medicare, at least not without also giving up your Soc Sec benefits.

"The five plaintiffs, who now include former House Majority leader Dick Armey, are challenging a policy of the Department of Health and Human Services (DHHS) that denies Social Security benefits to anybody who refuses to enroll in Medicare.
Read that again: As the policy now stands, if you want to pay for your own health care rather than let taxpayers finance it through Medicare, government will not let you receive the Social Security benefits for which you have spent a lifetime paying taxes.
Note that nobody is trying to avoid contributing to Medicare. The plaintiffs merely want to decline the tax-funded benefits for which they already have paid."

So, will you be legally allowed to not drive a Chevy in 10 years?

MnM March 30, 2009 at 3:17 pm

It will have a big battery, a little engine, a solar array on the roof, and be completely safe – and I do mean "completely" safe – as in it will do zero to sixty in about 20 minutes.

…or zero to sixty sometimes or never. :o )

Gamut March 30, 2009 at 3:39 pm

"Are you going to refuse Medicare because it is government financing?"

I live in a place where the government does that. And the only thing keeping me from avoiding their pathetic and overloaded system is that anyone who tries to sell me an alternative would wind up in prison. Trust me, even if you pay for it, it's not worth the trouble.

Mike Laursen March 30, 2009 at 4:00 pm

Is it just me or is the President just a couple of steps away from becoming Cal Worthington? Is he going to start showing up on late night TV with a ten-gallon hat and a tiger named, Spot?

Methinks March 30, 2009 at 4:10 pm

Clearly, Obama has the same definition of "markets" as Gorbachev.

Crusader March 30, 2009 at 4:37 pm

Methinks – Gorby was the best President of the Politburo the USSR ever had! He had the courage to initiate glasnost, perestroika and admitted in the central committee meetings that SDI was too much to compete with. If anything Gorby was a realist. Russia would be glad to have him now instead of that Stalin-type Putin.

Methinks March 30, 2009 at 5:44 pm


You have drunk large amounts of the kool-aid mixed by the breathless western press. Nobody in Russia would ever say such a thing because Russians understood him to be nothing more than another communist party hack.

Gorbachev hadn't an ounce of understanding of economics nor was he interested in acquiring such understanding. was a hardliner, chosen and groomed by Andropov. A tyrant and communist to his very core, he only embraced the "market" as a last ditch attempt at obtaining hard currency and preserving central power and then his idea of a "market" is nothing like what a market really is.

Upon his rise to power, he originally theorized that socialism was in good working order except that the cogs (the people) were lazy, drunk and earning "dishonest incomes". Thus, he proceeded to terrorize people in the street in the middle of the day, gave strict orders to humiliate anyone late to work, arrested anyone whose breath smelled even faintly of alcohol (dumping the jail overflow outside the city in the middle of winter to trudge back home on their own), and threatened anyone who so much as rented a room to someone else in their apartment for collecting "dishonest income".

The campaign against "dishonest income" was reminiscent of both Stalin and Khrushev. All sources of income other than the official government salary were declared illegal and punishable by long jail terms for both the consumer and producer. The trouble was that the Soviet economy produced nothing that anyone desired and the only working market was the black market on which basic goods could be obtained. His battle against "dishonest income" effectively crushed the only working market, even more massive deficits of basic goods and the incarceration of tens of thousands of people guilty of nothing more than selling radishes from their own garden in order to spare their family starvation.

When all attempts to reform the "idiot cogs' in his finely tuned socialist machine failed, he turned to "market reforms" and began to speak of "planned, regulated socialist markets. That is to say, the means of production would be owned by the state, but these state enterprises would find their own funding and compete. At the time, the state could fund nothing as it was running massive hard currency deficits due to the collapse of oil prices. The state produced no goods that were marketable abroad as the whole of their production was worth less than the sum of the parts. New regulation piled on top old with the net effect of creating only robust new ways for petty party apparatchiks to extract new bribes.

There were roughly 15MM cars in the Soviet Union at the time when he foisted perestroika on the population. People were suddenly allowed to run a taxi service but they couldn't do anything as exploitative as hire drivers. Instead each proprietor had to drive his own car. He couldn't save the proceeds from his cab business to buy another car and hire drivers because that would be exploitation. Of course, there wasn't much chance of a profit as the police routinely stopped said taxis for trumped up traffic violations in order to confiscate most of their profits in the form of bribes. Even if there was a meager profit, since the shelves during perestroika were emptier than the pre-perestroika shelves and one couldn't build on success, there wasn't much point to it.

This is but a small taste of Gorbachev as "best president" who had the courage to try "planned and regulated markets" (which is pretty much just an even more bastardized version of the Soviet "planned" economy). Gorbachev was merely the guy at the head of the sinking ship when the ship sunk. In no imaginable way is he an once better than Vladimir Putin.

vidyohs March 30, 2009 at 7:30 pm

Hmmm, let's see now. The old Soviet Union owned auto factories, and made consumer autos.

As I understand it, if one could afford the auto and placed an order it could take as long as ten years before you'd actually see your auto. When it arrived and you actually drove it the first thing you noticed was the extremely poor quality of the parts and their assembly. In other words they were pieces of shit, and you couldn't give them away outside the Soviet Union.

Government owned auto plants and government guarantees didn't work to well for them, so why are we to imagine that they are going to work well for us?

I know I know (holding hand up), it's because the American union worker will always be much more conscienctious than the Soviet Union worker ever was…..tis true! And, the designers and suppliers will be devoted to quality above all….tis true!

Mr. Econotarian March 30, 2009 at 8:07 pm

Obama: "We cannot, we must not, and we will not let our auto industry simply vanish."

Me: Why not? Ever hear of Schumpeter? Besides, we have a perfectly good auto industry in the US, it just happens to report to people in Tokyo.

Obama: "This industry is, like no other, an emblem of the American spirit; a once and future symbol of America's success."

Me: Let's not spend tax dollars on an emblem. Detroit is not an emblem of future success, Google is.

Obama: "Recently, Chrysler reached out and found what could be a potential partner — the international car company Fiat "

Me: I hope Fiat is ready for a 90% tax on their executives! They are crazy if they try to get involved with GM given the current US government actions.

Obama: "Still, such a deal would require an additional investment of tax dollars"

Me: So you mean it will lose money. If it wouldn't lose money, you could raise capital to achieve it.

Obama: "if you buy a car anytime this year, you may be able to deduct the cost of any sales and excise taxes."

Me: Perhaps you should do the same thing for the payroll tax…

Obama: "Finally, several members of Congress have proposed an even more ambitious incentive program to increase car sales while modernizing our auto fleet."

Me: I assume you mean "increase American-owned car company sales". More protectionism, super! The WTO will love that.

Obama: "But I want every American to know that the path I am laying out today is our best chance to make sure the cars of the future are built where they've always been built — in Detroit and across the Midwest; to make America's auto industry in the 21st century what it was in the 20th century"

Me: The cars of the future are being built by people in Kentucky, Indiana, Texas, Alabama, West Virginia, and California. You can't turn back the clock. You can only move forward.

Obama: "I got my start fighting for working families in the shadows of a shuttered steel plant…"

Me: And how is that steel plant doing today? Still shuttered, huh?

Obama: "Remember that it is precisely in times like these — in moments of trial, and moments of hardship — that Americans rediscover the ingenuity and resilience that makes us who we are. "

Me: Yes, creative destruction is often the basis of new entrepeneurism, exactly what you are trying to avoid from happening.

Methinks March 30, 2009 at 8:50 pm

Obama: "I got my start fighting for working families in the shadows of a shuttered steel plant…"

Yeah, because we all know that the only families who work are the unemployed families and the proletariat. Anyone who actually works and succeeds – that is, makes a lot of money – is merely leaching off the unemployed or barely employable working families. Exploiters. Oh, if only they opened that plant and tossed…..nevermind.

vidyohs March 31, 2009 at 6:16 am

Good stuff Mr. Econotarian,

Unfortunately with thinking like that the White House would treat you like toxic waste. Be nice if you could get it in front of Obama.

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