It may just be my imagination or the natural human tendency to try to see order in something that’s chaotic but I seem to see a common theme emerging lately: our leaders are dealing with the problems they wish we had rather than the problems we actually have. Or, in a variant, acting as though the economy were something other than it actually is. One example of this is from Daniel Henninger’s column today at the Wall Street Journal:
In his State of the Union Address, Mr. Obama described what will be a major claim of his re-election campaign—that he renewed the American dream by bailing out General Motors. About the defensibility of this policy we can argue. But as is his wont, Mr. Obama erected a generalized theory of social betterment atop this one event. “What’s happening in Detroit can happen in other industries.” Mr. Obama announced. “It can happen in Cleveland and Pittsburgh and Raleigh.”
It can?
What’s interesting about this claim is that the corridor between Cleveland and Pittsburgh, much of it economically moribund for years, is experiencing a rebirth thanks to real economic forces, not a president who types in the name of another beleaguered city and hits Ctrl-Shift-Enter to solve its problems.
Most of this revival is taking place around the godforsaken city of Youngstown, Ohio, and the formerly dying steel towns west of Pittsburgh, an area better known today as the Marcellus Shale Natural Gas Field. Last summer, a French steel company, Vallourec & Mannesmann Holdings Inc., began construction on a new $650 million plant to make steel tubes for the hydraulic fracking industry. About 400 workers are building it. Nothing Barack Obama has done in three years—not the $800 billion stimulus or anything in his four, $3 trillion-plus budgets—is remotely related to the better times in Ohio and Pennsylvania.
But other than grudging acknowledgment of the private entrepreneurs’ natural-gas success, don’t expect to hear the carbon-based word “fracking” much in the president’s stump speech when he paints in the numbers of the American economy as he imagines it. That pitch will run more toward the ideas in the Presidential Memorandum released this Tuesday, directing the Department of Agriculture to put in motion a program called “Promoting a Bioeconomy.”
He goes on to describe the Obama Administration’s embrace of a program, started under the Bush Administration, to encourage the production of products derived from biological sources rather than “chemicals or petroleum bases”. Ignore the clumsy diction that suggests that if it’s biological it isn’t chemical which is absurd.
As a side question how is making soap or deodorant from food crops or using land suitable for food crops to produce crops used to make soap or deodorant morally superior to using corn to produce ethanol to use as fuel?
The key point is that we shouldn’t subsidize “biobased” products whether fuel or sundries or whatever. We shouldn’t subsidize electric cars or solar panels or any other purportedly “green” technology. What we should do is eliminate agricultural subsidies and subsidies for the production of coal and oil. Or introduce Pigouvian taxes which represent the actual cost that coal and oil impose on the economy in one form or another (including hundreds of thousands of U. S. soldiers and sailors in the Middle East).
Products should rise and fall on their merits. Doing otherwise doesn’t produce jobs on net it reduces them.
We’ve got to start dealing with the economy we have rather than the one we wish we had. In the economy we have fossil fuels will continue to be important for the foreseeable future. In the economy we have labor unions, while vital in ensuring that working conditions are safe and just, won’t be able to secure middle class incomes for unskilled workers. In the economy we have large companies, those with 500 or more employees, will be of decreasing importance in employment while smaller companies will be of increasing importance. Further, the future is overwhelmingly likely to one of gigs rather than jobs. See Walter Russell Mead’s recent post for more on this subject.
The irony that I’ve not seen mentioned is Obama led a bailout of G.M. by infusing public cash that permitted G.M. to close over a dozen plants in the U.S., lay off a quarter of its employees, and close somewhere around forty percent of its dealerships. Similar with Chrysler, with the added outcome of an Italian company becoming the major owner.
And people have a problem with private equity because . . . ?
[O]ur leaders are dealing with the problems they wish we had rather than the problems we actually have. Or, in a variant, acting as though the economy were something other than it actually is.
Look at who our political leaders are. That explains a good deal of the problem. They generally come from four different fields: lawyers, economists, journalists and lobbyists. (I consider lobbyist a specialized form of sales/marketing.) There is overlap between the different fields, of course, and a smattering of this and that thrown in, but that’s the bulk of it.
Lawyers are obsessed with legalisms and precident. Economists are obsessed with models. Journalists are obsessed with getting drunk and bitching that no one does what they want done. And lobbyists are looking to extract dollars from their clients in order to get the government to do what they want, which is usually to give money to their clients.
Which of these professions are forward looking? The economists might qualify, except that they’re only interested in data these days, and they want data that will confirm their models, i.e. their biases. The others are all obsessed with the past.
Add to this the problem that those are the very top are increasingly products of the Ivy League. The Ivy League is so obsessed with the idea of its superiority in all things that it seems ossified at this point. Everyone thinks the same thing, and anyone that doesn’t think the same thing as everyone else MUST be wrong. Those in the natural sciences have a process that will eventually break through such idiotic thinking. But (a) we’re not exactly electing a bunch of natural scientists and (b) even if we were they wouldn’t actually be dealing with science problems. And to the extent that they’ve often worked in government funded environments they might be biased towards top-down governmental programs anyway. After all, if you’re a rocket scientist, the Apollo program looks like a great success, so why shouldn’t we do that for EVERYTHING?
Anyway, we just aren’t electing people with flexible minds. Many of them last changed their mind on anything as undergraduates. I noted when the financial crisis was coming to a head in September & October of 2008 that neither Presidential candidate displayed any suppleness of mind at the time. McCain ran around like an chicken with his head cut off and Obama tried to look Olympian, but neither shifted their campaign an inch in reality, nor came up with anything original. They both just followed Bush’s lead (which is to say the lead of Hank Paulsen and his subordinates), with Obama later deciding that maybe we should throw money at Detroit.
We’re not going to get anything different until we tear the whole system down and throw the current set of bums out of office. (And prefereably straight into jail cells.)
PD, the Obama’s of the world don’t have a problem with what private equity does, they have a problem with the fact that THEY aren’t accruing the benefits. Plus, the layoffs were good for the economy. Unemployed people are a stimulus, Valerie Jarrett sez so. If only MORE people would get laid off we’d really get this mother rolling!
“Most of this revival is taking place around the godforsaken city of Youngstown, Ohio, and the formerly dying steel towns west of Pittsburgh”
If this were OTB what I’m about to write would probably bring howls from the usual unnamed (human rumma joe, stormin Norman, and some guy in CT) suspects. Yes, there is a revival. The firm of yours truly drove a transaction in the rigid packaging arena in Youngstown that is a poster boy of success. And we (and the majority owner; the deal was too big for us so we had to bring in a big money partner) are now driving capital spending on a new technology that we believe will be adopted by key customers the likes of Coke, the beer boys, and Unilever that will drive further growth in sales, earnings and employment.
Now the part that would piss off the un-named (snicker) commenters. Youngstown, OH?? Say what? Well, no unions. The authorities turned from adversarial to facilitating wrt regulations. it is a product that stands on its own economically, as Dave points out. It is a product that offers product features and cost benefits relative to the competing product offerings. Obama or Congress had nothing to do with it. It doesn’t catch on fire when you use it ( sorry). The government doesn’t have to pitch in $10k per unit. Oh, and it’s recyclable .
Sumbitch. That’s how it’s done people. That’s how it’s done. Anyone who knows manufacturing knows Ohio is viewed as one of the worst environments. But look at what can happen when policies and efforts that I (heh) advocate prevail, and not the brummajumma joes of the world advocate. The US can successfully manufacture in many product categories, if the left would just get out of the way and stop their ridiculous policy stances.
Ps – electrical energy is a big cost input in the manufacturing process. It would be nice if Obama and his energy secretary would quit trying to poison coal and natural gas while feeling themselves up in a Chevy Dolt.
Translating Drew:
Everything would be fine if only we didn’t have Obama. Which is why everything was great under Mr. Bush.
Speaking as a person with a forward-looking, flexible mind, I’m not sure you want us running things, either. Imagination is a lovely thing, but imagination and organization don’t often travel together in the same brain.
Now, now, Michael, sweaping generalizations such as that never make or refute a point. They just make one feel good.
The fact of the matter is that my example is a concrete one of how product innovation meets manufacturing revival in blighted areas meets environmental goals…………despite headwinds explicitly cited as desirous by Obama and his energy secretary.
Their effors are, well, cartoonish.
Drew:
Actually, snark aside: congratulations. May the jobs be created and the profits flow.