Tuesday, June 02, 2009

Horses, nationalizations and czars

I have just finished reading The Horse in the City (by Clay McShane and Joel Tarr), which does a fine job documenting what went on (in American cities) between the years of the "pedestrian city" and the "automotive city". The book is a fascinating bit of research on modern urban history.

We learn, for example, that “In 1890, 9,163 establishments manufactured carriages and wagons or their parts, employing more than 90,000 workers to make over one million vehicles worth over $32 million.” (p. 31).

But GM sold just over 2-million vehicles in 2005. The Detroit Big-3 sold 5.33 million. The U.S. population in 2005 was about 4.7times that in 1890. The ratio of vehicles then and now is 1:5.33. So we are in the ballpark. But McShane and Tarr make no mention of demands for bail-outs or nationalization because the industry of its day was "too big to fail."

The folks that gave us the Cimarron, Chevy II and the Nova (and many other duds) should have failed many years ago. The only way that progress happens is when market forces punish inefficient firms (and models) and competition brings forth better ones.

Arguments to throw good money after bad come easily (AMTRAK, Postal Service and many more). The big change at GM is that explicit politicization has replaced implicit politicization (a la Fannie Mae and Freddie Mac).

Much has been written about all this, but I did enjoy yesterday's WSJ which included the testimony of a real Car Czar, Ion Mihai Pacepa who was given the job in Romania in the 1960s by Nicolae Ceausescu.

The current Administration does to see the irony and talks openly about appointing various "czars" to run various industries.