GM Loses Another $16 Billion -- Bankrupt?

[KrazyHorse]

[Agathon]

Originally posted by KrazyHorse
You're acting as though our economic system should be set up to promote "fairness" (defined in some fuzzy way).

Uh yeah... it like is...

Who the **** cares about fairness? If GM pays its executives and workers too much then they'll go out of business. Oh, wait...

Human beings care about fairness (well, most of them). While they might disagree about hard cases, there is a general conception of fairness at work in most societies (the reason we might not say so is that nobody makes a big deal about the stuff we agree upon).

And given that most people have a preference for fairness, you'd think that any sane economy would be set up to enable this preference to be satisfied, and lo, developed economies have welfare states partly in order to do so, because free markets tend to suck dog crap at satisfying such preferences.

Sure we have to trade off fairness against satisfying other values we have (which is one possible justification for obscene salaries), but you'd be hard pressed to find a community willing to abandon it completely (outside of stockbrokers, economists and other morally crippled people).

So our economic systems are set up to promote fairness among other values (welfare, liberty, etc.) as a matter of established fact.

[Asher]

Originally posted by Agathon
Uh yeah... it like is...

Mister "buy AAPL @ $200" is giving more financial opinions. I'm listening!

[KrazyHorse]

Originally posted by Agathon


Uh yeah... it like is...

No. Naively it was set up that way. As it grew, any reasonable concept of fairness was lost.

Human beings care about fairness (well, most of them). While they might disagree about hard cases, there is a general conception of fairness at work in most societies (the reason we might not say so is that nobody makes a big deal about the stuff we agree upon).

Again, while the average person might think that **** should be set up to be "fair", any reasonable study of how **** is actually set up shows that fairness is only tangential.

And given that most people have a preference for fairness, you'd think that any sane economy would be set up to enable this preference to be satisfied, and lo, developed economies have welfare states partly in order to do so, because free markets tend to suck dog crap at satisfying such preferences.

Welfare states are a mish-mash of preferences. "Fairness" is one of them, and may be the one most often used to appeal to the general public. But such appeals are laughable on their face. If we actually wanted fairness we would impose a 100% inheritance tax, close down private schools, impose backward-looking income redistribution and tax the talented more heavily independent of their income.

Sure we have to trade off fairness against satisfying other values we have (which is one possible justification for obscene salaries), but you'd be hard pressed to find a community willing to abandon it completely (outside of stockbrokers, economists and other morally crippled people).

Concern for others is not the same as fairness.

So our economic systems are set up to promote fairness among other values (welfare, liberty, etc.) as a matter of established fact.

Again, they are set up to promote "fairness". Which is different than fairness.

[snoopy369]

The issue is not whether fairness is an element of the economic system or not. All economic systems are designed around some degree of 'fairness'. It's a matter of what is being defined as fair and how.

Communism: fairness of outcome
Capitalism: fairness of opportunity

In our system, everyone is equally able to enter the market with a product and sell it. (Yes, even when you consider capital as a necessity to enter the market, it is trivial to obtain capital to back a product if it is remotely useful - look at some of the crap out there if you need to see an example). Everyone with a given skill is equally able (in theory) to enter the workforce and benefit, equally, from that skill, in proportion to their skill. The problem is when that is no longer true - such as with GM - where people are being paid not in proportion to their skill, but in proportion to their length of employment solely, and out of proportion to what that ought to be in other similar situations.

[KrazyHorse]

Originally posted by snoopy369

Capitalism: fairness of opportunity

Biggest lie around.

Fairness of opportunity requires equal distribution of talents and early education, along with no inheritances.

[snoopy369]

I disagree, particularly on the talents. I would postulate that everyone has some talents, and perhaps everyone even has an approximately equal capacity to develop talents generally (but not specific ones). Certainly, everyone has the ability to develop adequate talents to succeed in life to a high degree in SOMETHING.

Inheritance I certainly see as one of the flaws in our current implementation of capitalism, but I think it is not a crucial flaw. Ultimately, fairness of opportunity means that everyone has the chance to do (stuff), and that is true for everyone, far more than it has been in the past. It may not be perfectly true, but no system is perfect - I think the fact that so many people DO successfully leave the ghetto or whatever and succeed substantially proves that the opportunity is present. It may require more or less work to accomplish (goal), but the opportunity to accomplish it is still present for all.

[KrazyHorse]

Originally posted by snoopy369
perhaps everyone even has an approximately equal capacity to develop talents generally (but not specific ones).

That's a ridiculous statement, if we are judging talents by their economic impact (which we are).

[KrazyHorse]

Inheritance I certainly see as one of the flaws in our current implementation of capitalism, but I think it is not a crucial flaw. Ultimately, fairness of opportunity means that everyone has the chance to do (stuff), and that is true for everyone, far more than it has been in the past. It may not be perfectly true, but no system is perfect

In other words, you can't even define what you mean by the ideal of "fairness". Or you're choosing not to, because it leads you to the extreme that I stated earlier.

Fairness is an emotive concept. It sounds good until you actually start to look hard at it. Then you realize how ridiculous it is to try to maximize fairness in the context of an economic system as complex as today's.

Fairness requires that equal inputs of moral quantities (say, hard work, honesty etc) leads to equal outcomes. In fact, luck, genetics and circumstances of birth are the largest determinants of outcomes. Moral inputs are far, far less important.

[KrazyHorse]

To Aggie: if I cared about fairness and thought that our system was anything close to fair then I would despise the poor (poor after redistribution) for their moral failings.

Outcomes and morality are virtually uncorrelated under any reasonable definition of either. This is not "fair".

On the other hand, you can make the case that MARGINALLY expected outcomes and morality are strongly correlated. This is mandated by efficiency, not fairness.

[Aeson]

"Fair" in a capitalist system should be the same laws for everyone, enforced equally. Our system definitely isn't "fair" in that regard. (See SEC vs Mark Cuban sans SEC vs the vast array of real crooks out there who have been cooking their books.)

[Arrian]

Originally posted by KrazyHorse


Biggest lie around.

Fairness of opportunity requires equal distribution of talents and early education, along with no inheritances.

Which is why an inheritance tax is good policy. Unfortunately, ours is a joke.

Not so sure about heaping extra taxes on the "talented" though. Is motivation a talent?

-Arrian

[KrazyHorse]

"Fair" in a capitalist system should be the same laws for everyone, enforced equally

This is a valueless statement in the context of the current discussion.

We are discussing how to design a legal system, not how to enforce it. Your statement reminds me of the "the rich are as free to starve as the poor" (paraphrased).

Under your requirements, a legal system where children are put to death at birth unless their parents pay 50000$ is fair.

[KrazyHorse]

Originally posted by Arrian


Which is why an inheritance tax is good policy. Unfortunately, ours is a joke.

Not so sure about heaping extra taxes on the "talented" though. Is motivation a talent?

-Arrian

AHA!

Now you're reaching the central point. Good job getting there first!

We (generally!) make the capacity and inclination to hard work a moral quantity. Why should we? If even THIS is arbitrary from a moral point of view then does "morality" have ANYTHING to do with outcomes?

Almost everybody, on the other hand, would agree that the capacity for quantitative analytic thought is not a moral quantity. But if I "don't make the most" of mine, I am in no way punished relative to somebody who is simply born without that capacity. Where is the fairness in this?

[Vanguard]

Number 1 sign that you have won an on-line argument:

Instead of responding to your post, the other guy throws a tantrum.

Originally posted by KrazyHorse

Since the union imposed approximate wage equality through these companies much of their cost structure was identical

Hmmm, maybe if I use a lot of bold the boneheads will be able to follow along.....

A union cannot extract excess rent on the sale of cars. Because they don't sell cars.

Car companies sell cars.

And if there are three car companies (like the "Big Three"), then there is competition in the market, and they cannot extract excess rents.

Now, a union could extract something like an "excess labor price" from all of the car companies. But all this could do is raise the costs of one or more of the car companies until they can't compete and go out of business. It cannot allow all three car companies to extract excess rents competitively from the car buying public.

Bang! You're dead. Argument over.

To be fair, AMC and Chrysler did go out of business.... in the 1970s. But the modern car industry was born in the 80s. The 80s. By the 1990s the idea that car companies could extract excess rents on car sales is ridiculous.

Consider the number of car companies selling cars in the US in the 1990s:

Audi, Alfa
BMW
Chrysler
Daimler
Ford, Ferrari
GM
Hyundai, Honda
Izuzu
Lamborghini
Maserati
Nissan
Porshe
Subaru, Suzuki, Saab
Toyota
Volvo, Volkswagen

If this isn't perfect competition in auto sales, I don't know what would be. Twenty different companies on three continents with five different labor pools. So.... probably different cost structures, don't you think?

And yet, even with this competition, GM, Ford and even Chrysler made very good profits, despite having labor contracts basically the same or worse that what they have now.

Can you explain that by means of excess rents? No?

Didn't think so.

Already dealt with. Toyota and GM both pay at least the amount necessary to have enough labour with the right skill profile in order to build the amount of cars they need to. Toyota pays its workers less than GM. Therefore Toyota is closer to the market-clearing wage than GM is. M < T < G

There are multiple labor markets here. The market for UAW workers in Michigan is not the same as the market for union auto workers in South Carolina or Japan. Therefore there is no single market clearing wage.