(Week 20 - Wednesday, Dec. 24)
A headline on the front page of the Monday, December 22 edition of the New York Times proclaimed, "Car Slump Jolts Toyota, Halting 70 Years of Gain," elaborated in the subtitle with "Huge Decline In Sales." Does not this announcement have the effect of casting the troubles of the American automakers in a new light? What does it say about the conditions under which the auto industry is laboring if even Toyota, widely regarded as its most successful venture, is expecting to report "…that it will lose money this fiscal year on its vehicle business for the first time in seven decades"?
Much has been written about how the "big three" American carmakers have declined supposedly due to astronomical executive compensation, bloated union contracts and inferior or out-of-tune-with-the-times products. Such criticisms do indeed have merit (and to be fair there are many positive things that could be said about the American auto industry), but the fact that Toyota is being sucked into the red-ink vortex also is telling evidence that on some level the problems of the automotive industry are universal. This is not to say that issues of executive compensation, labor costs and product quality don't matter. On the contrary, they do matter, vitally, and Detroit could indeed be criticized for undermining its own position in many ways.
That said, the crux of the problem the industry is faced with now is not primarily business in nature, but monetary. In fact, this is a factor that undermines the prospects for all sectors of the economy to endure in the long run. Stated simply, the productive part of the economy in the aggregate cannot attract enough money to pay its cost of production due to the buying power that is lost to "interest" charges attached to the bank loans by which money is created and issued into circulation. The result is that a portion of its product must go unsold, unless, that is, people are able and willing to go to the bank and take on more "debt" in large numbers. The effect of this is hitting the auto industry especially hard right now because people are reluctant to borrow large sums of money under current financial conditions, and the banks are reluctant to lend in any case.
This can only be remedied when the buying power of the consumer sector lost to "interest" charges is restored, and when the confidence of the car-buying public can be restored because people can see how this is so. Government borrowing of ever greater sums of "debt-money" into circulation willy-nilly via the "bailout" packages currently being enacted may, or more likely may not, get the economy moving again in the short run, but at best it will only put off to a more terrible reckoning the day when this simply does not work anymore.
The measure that will be effective, in my view, is to restore the money-creation franchise to the public sector; that is to have the US Treasury issue the nation's money supply for the public good, and not a private banking system for private profit. This is common cause for all segments of the economy, including the banking system itself (are not banks presently going bankrupt without government intervention at a fearful rate?).
The issue of money has long been used to divide the different segments of society, one from the other. We can readily see in the media how the interests of management, labor and the consumer have been pitted against each other over who will get the cash. This is happening because we are trying to carve up an economic pie that inevitably does not have sufficient funds to satisfy the need to make the financial ends meet for all three sectors without someone having to take on more "debt." If, on the other hand, the discussion were to turn to the idea of returning society's own money-creation power to the public sector, the availability of enough aggregate buying power to fully purchase the fruits of production would be assured. Business factors aside, this is the basis for the auto industry's (and all industry's) salvation.
Under such a condition, it is possible that the monetary issue could be transformed from one that is divisive with respect to any social fissure that could be exploited, to one in which everyone, from the highest banker to the most destitute street-person, could engage in a unifying transcendent dialogue. I have spent two-plus decades pursuing such a dialogue, and have seen much on this path to give me reason to think that it is perfectly possible, and indeed natural, to be able to speak to matters of money with an assortment of folks of whatever mix or stripe, in such a way that the conversation resonates positively with all parties. To be sure, this is not automatic, and it remains an elusive goal in some cases, but in my experience the potential and/or reality is palpably there.
This is a conversation that we as a society urgently need to have, or our civilization is going to continue to degrade and fly apart over the very issue of money. The key to transcending matters of money is to break free of our habitual "debt-money" acculturation long enough to let new ideas enter in. There is no leap of faith involved, only a moving forward with an open mind, spirit of brotherhood and genuine communication. The alternative is to keep floundering in our present ineffectual way until the economy deteriorates to the point where even the most innovative, savvy and successful enterprises in the business world (i.e. the Toyotas) cannot make it.
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The complete set of columns from this series is posted at the following websites.