The Undismal Weekly Wrap-Up -- May 31-June 6, 2009

Analytical Summaries of Key Stories of the Week on Economics and Public Policy

Central Bank, Government Policy May Have Ended Slump, BIS Says
A “green shoots” story in which Jennifer Ryan of Bloomberg reports on comments in the new quarterly report from the Bank for International Settlements (BIS) on improved investor sentiments, driven by such policies as interest rate cuts and purchases of assets by central banks, indicating that the “global recession may be past its worst.”

Chk It Out: Execs Use Twitter for Biz
Once the current tweetal-wave of hype begins to fade, will Twitter prove to be an ephemeral fad, or will it remain popular, useful and effective for the long haul as a business and marketing tool? A story in the News & Observer (Raleigh-Durham-Chapel Hill, NC) reports on insights from executives who are taking their tweets very seriously.

Economists React: “Why Would Companies Hire?”
Remarks from economists, in the Wall Street Journal’s Real Time Economics blog, on the “smaller than expected decline in nonfarm payrolls and increase in the unemployment rate.” Commentators include Heidi Shierholz, Economic Policy Institute; Ian Shepherdson, High Frequency Economics; Guy LeBas, Janney Montgomery Scott; Joshua Shapiro, MFR Inc.; Steven Ricchiuto, Mizuho Securities; Richard F. Moody, Forward Capital; Millan L. B. Mulraine, TD Securities; David Greenlaw, Morgan Stanley; and Scott A. Anderson, Wells Fargo.

Is GM Really Too Big to Fail?
Howard Wial, Director of the Brookings Institution’s Metropolitan Economy Initiative, and Daniel J. Ikenson, Associate Director of the Cato Institute’s Center for Trade Policy Studies, face off in the Los Angeles Times, in a “point/counter-point” format, on whether a complete failure of General Motors would have put more stress on the auto industry. Wial argues in favor of government intervention but urges more of an eye on strategically positioning the automaker for what is likely to happen in the market after the recession is over, while Ikenson argues adamantly for the laissez-faire approach, adding that government involvement with GM adversely affects the competitive playing field for other, healthier automakers.

The Facts About the Health Insurance Industry
In a blog post on The Daily Kos, a practicing family physician argues, after providing a scathing contextual background about the profit-driven motivations and heavy lobbying clout of the private health insurance industry, that “The only cure for our problem is a single payer, national, universal, health financing program like Medicare for All.”

Why This Crisis May Be Our Best Chance to Build a New Economy
Though some might describe his economic visions as new-agey, fancifully Utopian, kumbaya-ish, and reflecting a concept of human nature that may not hold true in practical reality, David Korten always makes for engaging, thought-provoking reading. His vision of an economy that serves people rather than the reverse, while also respecting the environment, was formed during his years abroad as an international development professional. In this article, Korten argues that the current crisis hit at an opportune time, “before the worst of global warming or peak oil,” and has shaped public opinion in a direction that creates an unprecedented opportunity to “build a powerful popular political movement demanding a new economy designed to serve our children, families, communities, and nature.”

The Real Roots of the Auto Crisis
Detroit Free Press columnist Carol Cain reports on her interview with David Cole, chairman of the Center for Automotive Research in Ann Arbor, who argues passionately that a misinformed national media in the U.S. have driven the public to the conclusion -- erroneous, in Cole’s view -- that the crisis of the automobile industry is the result of a failure of management. The crisis is attributable entirely to “the massive collapse of financial markets” according to Cole, who adds that automakers throughout the world have been the beneficiaries of government support during the global crisis, with the U.S. being a late entrant with efforts to aid its manufacturers. Sphere: Related Content

Reinventing the American Auto Industry

So today we see that the Obama administration is essentially reading the riot act to GM and Chrysler, forcing out a CEO and imposing tough conditions on any further federal assistance.

If GM and/or Chrysler end up merging, folding, or becoming much smaller versions of their former selves, what opportunities might that present for entrepreneurs here in the U.S. to create an entirely new and vibrant auto industry, centered on new technologies and alternative fuels?

For a century, the auto industry that we know today has been basically riding the coattails of the vision of one entrepreneurial innovator named Henry Ford. Although enhanced by a legion of add-ons like computer-controlled ignition, fuel systems, and transmissions, emission control equipment, better safety features, and other refinements, the autos of today are still, at the core, based on the same old internal-combustion engine technology as the Model T.

Hello? Aren’t we just slightly overdue for something new?

What would an exciting, innovative reincarnation of the American automobile — a Purple Cow Car, to borrow the terminology of Seth Godin, one of my favorite business gurus — look like? Perhaps, with an outfit like Tesla Motors, we are already seeing a hint of what a new auto industry could look like. Meanwhile, here is my own wish list for a Purple Cow car:

--Should run on an inexpensive alternative fuel
--Should sell for a reasonable price — low enough for someone of average income to save enough cash in a reasonable amount of time to purchase outright, or at least to pay off in a short period, two years tops; this, in turn, would create an accessible used market for folks of below-average incomes
--Should require little routine maintenance

I have one additional wish that, since I’m not an engineer, I’m not sure is realistic. But leaving aside the atrocious gas mileage and arguably inferior safety profile, I really miss the cars of the 1960s and 1970s, mostly because it was feasible, and not very expensive, to perform do-it-yourself maintenance and repairs. Maybe with the right technology that could be a moot point, with 10 years and/or 100,000 miles of virtually maintenance free service life being a realistic target today.

I encourage you to comment on this post to add wishes of your own.

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