Descend into the Maelstrom

2009 will turn out to be a transformational year for the nation and the rest of the world. Nobody doubts that the problems facing both are dire; the question of the day is, are they intractable problems? Are things utterly hopeless?

Ever the optimist, I think not. I believe in humanity’s, and particularly Americans’, ability to mobilize, although it takes a swift kick in the ass in the form of a crisis for this to happen. I am beginning to think that this is the way of human nature. I certainly know it’s been the case in my own personal life: I can only pack suitcases on the very day of a big trip; I can only finish assignments for school the night before the deadline. Sure, I’ve tried packing early or writing research papers early; the issue is that the quality and effort simply will not be there.

Unfortunately for us, we are the confluence of multiple crises, any or all of which could become intractable in a hurry. So although a crisis may have been what the doctor ordered, we will be tested on our ability to multi-task our way through. I predict we are going to stumble through limping, but the key point here is that we will make it through. The need of the hour more than anything is confidence; fortunately for us, President-Elect Barack Obama has that specific attribute in spades. Confidence in the economy, in our military, in democracy, in our leaders, and in each other is the only reason we will make it through the tough times.

Below is the first in a rundown of what I think are the biggest crises facing us, and what the new Obama administration must do to mitigate them.

Big Three Car Manufacturers on their Knees. It continues to upset me that GM, Ford, and Chrysler can produce inferior vehicles and expect the government to bail them out. Their cars are worse in every way: reliability, fuel economy, style, safety, and engineering. Like Michael Moore said recently, directed at the management of the Big 3: “Go to a Toyota showroom and just drive one around the block. Just one.” He’s right, of course. If executives in Detroit took an even cursory glance at what’s going on around the world, they would realize that they are getting their tailpipes bent over by foreigners not because of the credit crunch, but because other countries around the world are making better cars.

I’m of mixed opinion on how to proceed. On the one hand, I know that if the government pays up $25 billion to the Big 3, it will be like pissing in the wind, throwing good money after bad, as I so often witness government doing at all levels. The guys in charge are not going to stop making junk cars. Their sales are not going to improve against the Hondas, Volkswagens, Toyotas, and Tatas of the world in the future. American manufacturers have gotten lazy and depended on the government protecting them through tariffs and subsidies and bailouts in the past. Why not expect more handouts? Wouldn’t another one just come along down the assembly line from Uncle Sam anyway? That’s what I’d do if I were one of them, and then I’d ride my corporate jet back to Detroit, too: because I’d be living in an artificial bubble of reality with my $25 million paycheck. On the other hand, I am concerned about the potential bankruptcies because of the ripple effects it will have on the economy.

If plants shut down and 30,000 people at a blow are laid off, we will survive. We’re watching the investment banks do that right now. However, what concerns me is that each of those jobs represents multiples of that number of livelihoods in terms of support services: the suppliers who provide the tires and brakes and engines and headlights; the bars and restaurants where auto workers go after work for a beer and a burger; the shopping malls and movie theaters; and the dealerships and auto repair garages who need a steady stream of new car sales to keep their shops running. This so-called ripple effect will be felt from Taiwan to Texas. Unless.

Unless the core principles of international trade are to be believed: separation of specialties between countries is a good thing. Let Japan and Korea and Germany make cars. We’ll buy them, and sell back Britney Spears songs and Google software- focused on things we are good at doing, like pop music and hi-tech entrepreneurship. And everyone will buy champagne from France to celebrate in the meantime. International trade tells us this is the optimum use of resources for everyone globally in the long run. Mr. Obama and Congress: let the Big 3 fall on their bankrupt asses unless they can innovate themselves out of it like 99% of businesses in America and around the world are expected to do. Just because they’re gigantic should not make us throw out the economics textbooks. Let the assets and employees get re-purposed toward making things we really need, like light rail systems, monorails, bridge reconstruction, hybrid car batteries, etc. I’m all for spending that money, Washington.