Wednesday, July 9, 2008

The Disaster in Microcosm

If you want to get a snapshot of what hubris and blatantly ignoring economic reality will get you in the long run, check out Autoextremists' Rant #453.

...After years of writing about this industry and analyzing GM, I can safely say the answer comes down to a very simple realization, and that is that no one at GM – from CEO Rick Wagoner on down – ever actually believed that what was happening in the U.S. market was really going to continue, that somehow, some way GM would rise up again and return to its rightful place as the biggest car company in the world. In other words, a level of hubris is alive and well within General Motors that is absolutely breathtaking to contemplate...

Few realize that the quote from GM's Charlie Wilson back in 1952 still obtains - "What's good for General Motors is good for the country." It's not nice to say it these days, but GM and the other auto manufacturers are still a key component of the wage base, tax base and manufacturing base for the United States. That such a major company could have ignored the reality of the auto market for over a decade and a half, ignoring the obvious course of action to remedy the situation, wishing and hoping that things will turn around if we just think happy thoughts long enough - it is a microcosm for the behavior patterns of millions of Americans and for the U.S. Federal Government.

Well, as a wise man once said, wish in one hand and shit in the other, then tell me which one fills up first. The Xanax and Prozac driven era of foggy thinking and happy wishing is about to be confronted with debt tsunami and employment crisis unlike anything witnessed in living memory. Mood matters. If people were true "rational economic actors" GM would have been restructured long ago and no one would be buying U.S. Treasuries right now. When the mood shifts, when the realization of just how bad things are sets in, then, finally, we can begin the rebuilding process.

Reading Autoextremist's take on GM is a great parable for the rest of us to contemplate.

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