Fixing the USA... or tilting at windmills?

Okay, I'm officially fed up, so this may be my first blog rant. I'm on vacation and can't sleep because the pieces of the total economic meltdown keep spinning around in my head... and no matter what anyone in DC does, it only gets worse. (And if you can't sleep on vacation, something really must be off.)

What I'm really fed up with is the piecemeal approach...

First, oil goes up again. So let's finally think seriously about a greener economy, part of which means getting some cars off the road, or at least getting more hybrids on the road. And we need that RIGHT NOW or the oil will stop in a couple years.

Then Lehman fails, so let's give Mr. Paulson $700 Billion for the financial sector. Maybe it will be to buy bad loans, maybe not. We'll see... either way, we need it RIGHT NOW or the economy will stop in a couple months.

Then the auto industry tanks, mostly because there's no credit to buy cars since the financial sector closed up. So let's bail out GM and Chrysler. Should that come from Mr. Paulson's money or somewhere else? Either way, we need it RIGHT NOW or Detroit will stop in a couple days.

Oops. The jobless rate is going up. Hey: let's build some roads and bridges! And we need to pick "shovel ready" projects RIGHT NOW or America will stop tomorrow.

Wait a minute folks. What happens if we take just a couple minutes and look at the bigger picture? I'll bet a better set of solutions will appear. How about this...

First, let's map out the biggest immediate issues we're looking at: the financial sector, automotive manufacturing, the environment, and American infrastructure. (There are a bunch of other issues we've temporarily forgotten about, but they'll be back.)

Rather than looking at them individually, let's see where they overlap:

That's interesting; several ideas emerge:

1) Where finance overlaps autos, we have a partial credit solution. Rather than giving more bailout money to Detroit, why not make payments from the $700 Billion to the financial sector contingent on Wall Street freeing up credit for GM and consumer auto loans?

2) Where autos overlap the environment, why not make payments to Detroit contingent on making more efficient hybrid cars that people actually want to buy?

3) Where the environment overlaps finance, why not get serious about developing the green economy?

4) And where they all intersect, why not make all government payouts go to helping the world's (former) greatest manufacturers shift the shut-down assembly lines towards start building the windmills and solar panels that will power the future?

It seems to me there is a lot more that makes sense when the pieces are looked at in concert rather than alone. All the sudden potential solutions that have a long-term impact emerge.

I think I can sleep now.

Hmm. Windmills...

Comments

[Doug Wolkon at Pluranomics]

Dan,
Great post. I agree with your strategy. Our 100 year old electricity grid is the most strategic place to attack; but I would add that the invisible hand will inevitably force the renewable energy revolution not a stimulus package.

"Essential" items such as food and electricity will continue to increase in relative value and inflate in price (numerator). In addition, renewable energy technology is dramatically decreasing in price (denominator). As a result the returns are going up and up.

Adam Smith writes that labor as well as capital is destined to find its most productive place in a free economy. That being said, Wall Street will inevitably finance renewable energy mortgages that provide real security backed by the sun and Detroit will begin to manufacture windmills and solar panels - an industry unlike the automobile industry that is completely saturated with estimates of 1.2 Cars per U.S. licensed driver.

Another ironic bonus with renewable energy is that your insurance costs should go away since it is unnecessary to insure against the sun or the wind.

[Todd Levy]

Great post Dan. As mentioned above, it was clear and easy to understand. A big idea in a small amount of real estate.

For those commenters who liked this way of thinking, you might also enjoy my friend Doug's blog Pluranomics...
http://pluranomics.com/
... and his related book The New Game...
http://pluranomics.com/the-new-game/

Here's a definition from the site...
-----------------
Pluranomics, short for Economic Pluralism, is the study of our upcoming evolution from a Capitalist to Pluralist system, from non-renewable energy to renewable energy, from global trade to local trade, from debt finance to equity finance, from top-down to bottom-up investing, and from monopoly culture to diversity culture.

Economic Pluralism attempts to achieve the ultimate balance between Mother Nature and Human Nature.
-----------------

Hope somebody here finds his writing as inspirational (and accurate) as I do.

TL

P.S. I sent him a link to this post so hopefully he'll come on and comment.

[Roland Smart]

Thanks for this post Dan! I can't wait to share this with my network. And I'm looking forward to incorporating more drawing in my own blog, that I just started!

Best. Roland
www.rolandsmart.com

[Matt H.]

I agree with the thinking - this is an opportunity to change the world. The only thing is that windmills are not the answer. See this post. http://smub.it/matt/sun

[editha]

thanks for the 'knowing quadrants' which i enjoyed. it's a neat story of what happens after going through grad school, when they promise an uphill climb but it's more like falling off a cliff and surviving it, on the road to freedom.
pls draw funny faces instead of showing flags for the upcoming translations of the napkin book.

[Ken Leebow]

Can you draw a picture of trust? Because, frankly, with the all that is happening now, we need people and institutions we can trust.

Candidly, a war for this and a czar for that just isn't going to cut it. It's about as relevant as the U.S. industrial complex -- very 1950s.

[Tim Tyrell-Smith]

Hey. Love your concept and congrats on the book. I am a fellow napkin guy or anything I can write on guy. I noticed your use of the Don Quixote image/analogy and couldn't help but comment. I have a blog called Quixoting - A Quest for New Ideas. I try to use what I see as the best parts of Don Quixote - his daring to act - as inspiration for action on my own ideas. And hope to inspire others to do the same.

I was inspired tonight by your success. Thanks!
http://quixoting.typepad.com

[[email protected]]

Ken, Andres, and Worth,

Thanks for the comments. I want to be clear though: in my mind this post has little to do with whether people are or aren't buying SUVs or whether American cars last. The fact is that as of today Chrysler has shut down all operations and GM is no longer financially viable. (And Ford is barely hanging on.)

We can debate who is at fault, but the next fact is that hybrids have been selling at an increasing rate every year for the past five years (if I could draw in this comment box you'd see a vertically ascending line), while SUV sales peaked four years ago and have been dropping ever since (a spike followed by a descending slope).

My intent is to see what happens when we look up from each individual picture and note how they intersect.

In WWII, GM reconfigured assembly lines from manufacturing autos to mass-producing Grumman TBM torpedo bombers while Ford reconfigured to produce Consolidated B-24 Liberator bombers.

Point being: if today we are in a "war" to fight the effects of global climate change AND we need to put millions of Americans back to work AND Detroit looks close to shutting down, why not have the US Gov. pay GM to reconfigure and turn back on those assembly lines... not to make bombers, but to make the windmills and other capital equipment needed for an environmentally sustainable infrastructure project of epic proportions.

*That's* the point I was trying to draw. :-)

[worth]

Ken and Andres,
The reason half the cars on the lot are SUVs and trucks is that people are not buying them. I tried to buy a Prius off the lot of any Toyota dealer late last spring in Dallas and there were simply none to be had unless I paid an extra amount above the sticker and got on a 2-4 week waiting list. People want hybrids! If I had wanted a pickup or SUV, I had my choice of anything I wanted, in any color, with a huge discount. Not as many people want those anymore!
LOVE them Texas windfarms sprouting up in the middle of former nowheres!

[Andres]

@Ken Leebow

I agree a lot with you.

And I want to add something else:

What's wrong with having huge SUVs that run on batteries? or at least give us 25MPG instead of 11?

American manufacturers produce GREAT SUVs and trucks. Lets make sure the next generation of those vehicles are green (or at least way more greener than what they are willing to do today).

@Dan: I like this post a lot! You just made it look simple, and easy to understand.

[David Barnes]

Dan, the payouts are about protecting the status quo, not jobs or the economy or anything else.

In a looming financial crisis, people (everybody deep down, I think) want payouts that will make things stay the same. People are scared.

[Ken Leebow]

Dan,

I believe your point #2 is either disingenuous or just wrong:

2) Where autos overlap the environment, why not make payments to Detroit contingent on making more efficient hybrid cars that people actually want to buy?

Here's the test: Go to any crowded parking lot and count about 100 cars.

I believe you will find about 50% are trucks or SUVs. So, I wish everyone would stop with this lie. In fact, about 50% of the population desires an SUV/truck.

And, the other piece of misinformation is that US cars are junk. Not true, many people own US cars that have well over 100,000 miles.

So, if we're going to have this debate, let's at least be honest about the issues.

Ken Leebow

[Brian Mac]

You should find a way to send this to the Obama team, when there's a will there's a way :)