SENATE REPUBLICANS: IDIOTS & FOOLS

Senate republicans got their way and wrecked a pending agreement to get a bridge loan to Chrysler and GM. What wrecked the deal is that they wanted to impose their vision of wage and labor standards, while at the same time claiming that Washington doesn't know how to build a car.

That's right. While they claim Washington shouldn't stick it's nose into the market place, they think it's OK for them to determine wage and labor standards for the auto industry - from their free market perches in Washington.

Let me make this clear, again: these guys are blithering idiots.

Keep in mind that these are the same guys that have stood by as their states have handed hundreds of millions to foreign auto manufacturers to entice them into their states, in the form of subsidies and tax holidays. These are also the same guys that have no problem using the power of the state to impose and enforce anti-labor provisions to attract foreign manufacturers . . . you know, just like Adam Smith talked about when he discussed the role of the "invisible hand" in the market.

But here's the real kicker. Senate republicans are pointing to foreign manufacturers, like those in Japan and Germany, and pretending that their automakers have made it because of market forces alone. Have they never heard of Friedrich List? Of course not. If they had heard of him, they would not have complained years ago about unfair market practices in Japan and Germany ...

Did I mention these guys are blithering idiots? Oh, OK. Then let me add that they're ignorant fools too.

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Anyways, here's a little story from economist Ha-Joon Chang, who takes "free-market guru" Thomas Friedman to task for ignoring, or not understanding, the long and storied history of the Japanese auto industry. Specifically Chang points out in his book (Bad Samaritans: They Myth of Free Trade and the Secret History of Capitalism, 2007) that Friedman doesn’t do his homework and, perhaps more importantly, doesn’t really know what he’s talking about when it comes to free trade:

Toyota started out as a manufacturer of textile machinery (Toyota 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.

Half a century after the Toyopet debacle, Toyota’s luxury brand Lexus has become something of an icon for globalization, thanks to the American journalist Thomas Friedman’s book, The Lexus and the Olive Tree. The book owes its title to an epiphany that Friedman had on the Shinkansen bullet train during his trip to Japan in 1992.

He had paid a visit to a Lexus factory, which mightily impressed him. On his train back from the car factory in Toyota City to Tokyo, he came across yet another newspaper article about the troubles in the Middle East where he had been a long-time correspondent. Then it hit him. He realized that that “half the world seemed to be . . . intent on building a better Lexus, dedicated to modernizing, streamlining, and privatizing their economies in order to thrive in the system of globalization. And half of the world—sometimes half the same country, sometimes half the same person—was still caught up in the fight over who owns which olive tree.”

According to Friedman, unless they fit themselves into a particular set of economic policies that he calls the Golden Straitjacket, countries in the olive-tree world will not be able to join the Lexus world. In describing the Golden Straitjacket, he pretty much sums up today’s neo-liberal economic orthodoxy: in order to fit into it, a country needs to privatize state-owned enterprises, maintain low inflation, reduce the size of government bureaucracy, balance the budget (if not running a surplus), liberalize trade, deregulate foreign investment, deregulate capital markets, make the currency convertible, reduce corruption, and privatize pensions.

According to him, this is the only path to success in the new global economy. His Straitjacket is the only gear suitable for the harsh but exhilarating game of globalization. Friedman is categorical: “Unfortunately, this Golden Straitjacket is pretty much “one-size fits all” . . . It is not always pretty or gentle or comfortable. But it’s here and it’s the only model on the rack this historical season.”

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.

There's more. But someone needs to tell Senate Republicans that they have no clue when it comes to understanding how the world really works.

- Mark