Peak Automobiles

CNN reports "Autos on U.S. roads set to fall." This is an unprecedented event. The automobile has been a defining aspect of American life. For most Americans, their first car is a right-of-passage. Likewise, most Americans consider their car indespensible.

The article suggests that the decline is mostly the abandonment of excess cars - moving from three cars in the drive to two. But it also hints at a decline of demand due to increasing unemployment.

Nowhere does the article suggest, as we do, that a permanent decline in incomes will produce a permanent decline in the need for autos. We don't think that view will ever make the mainstream. In the future, decline in auto use will mostly be reported as an increasing preference for urban life - or not at all.

In light of this development, bailing out U.S. automakers seems especially deranged. The industry already had excess capacity during the bubble years. Now it is even more questionable just how much manufacturing capability is needed. Certainly the U.S. Government is in no position to make this decision. Supposedly, that is what markets are for.

Oh wait, there is no market economy any more. If a big corporation with armies of lobbyists is losing money, the market can be swept aside, and Uncle Sam will pull out his teat.

Destroying economic value by perpetuating chronically loss-making operations was probably the main thing that did in the Soviet Union. Evidently nobody in Washington was paying attention at the time. Those who do not learn from history are condemned to repeat it.