Rock the Vote!

Many people think that voting is something that is performed, at most, about once a year. They could not be more wrong. We vote every day. When we go to the grocery store we vote on which type of orange juice is best. Which cereal is best. What type of apples we prefer and so on. When we decide whether to take the car to work or a form of public transportation we are voting on which method best suits our needs for the price we are willing to pay. The movies we see are votes for the kinds of movies we would like to see made in the future. The list of examples is endless.

The votes are constantly tallied. The competition is fierce and every day there are new winners and losers. Products that we vote against are either improved or discontinued, frequently along with the companies that make them.

This is one of the many reasons why the free market is so wonderful. It is a beautiful mechanism that empowers people to vote for the types of products and services they want, and tells companies what they would like to see more and less of. It is the ultimate messenger.

Too often, however, the government prefers to greet the messenger with a brandished gun than an open mind. When the price of gas goes up it is the marketplace's way of saying that gas is a highly desirable product and that more of it is needed. Rather than heed this message, however, politicians often prefer to blame the development on greed and evil corporations. High housing prices tell us that supply can't keep up with demand and is indicative that barriers exist to creating additional amounts of product. Rather than examine what those barriers are and how they can be removed, government instead typically responds with things like rent control, artificially low interest rate loans and "affordable housing" set-asides in new developments.

Right now people are voting on GM and Ford and the message is not a positive one. Sales figures indicate that they do not like the product while the stock price indicates a disbelief that a turnaround is likely. As Brian Sullivan explains:

For good or ill, the wisdom of the investing masses is that General Motors and Ford face very difficult times ahead, government aid or not. GM shares are at a 65-year low, even with the expectation by the crowds that Congress will pour taxpayer money into the problem. If taxpayer dollars were truly seen as a “bailout,” the stock would move higher on expectations of brighter days ahead.

I suspect most of America is rooting for GM, Ford and Chrysler. There are thousands of workers depending on these companies, and thousands more retirees. But the collective rooting is not coming in the form of a willingness to invest. The crowds have recognized the problems are structural, with sales falling and fixed costs remaining high. Congress needs to take note of this collective wisdom. If the people want to help rescue the U.S. automakers, let them do so through direct investment in the stock or by heading to their local Chevy dealership and picking up a new car. That’s the ultimate vote.

Congress playing the role of middleman is going against what the “wisdom of crowds” is telling us: simply throwing money at the problem is likely to ultimately result in more tricks, and fewer lasting treats.

Exactly. By ignoring what the marketplace is telling us Congress, and from all indications the incoming Obama Administration, is in effect saying that they believe they are smarter than the millions of people who have cast their votes on the US auto industry. They not only disagree with the verdict but believe that they have the answers to turn these companies around.

It's an astonishing level of arrogance, ignorance, or some combination thereof.