The Clevelands of the World

Today I watched a documentary on Cleveland’s decline. The tone was generally morose, though there were shimmers of hope
from all the new construction. New exurbs, renovations in the sururbs, even a brand new neighborhood in the city itself.

The documentary must have been finished up this summer, because then reality hit Subprimes — that disastrous result of government subsidies to social engineering and credit card companies, took down Cleveland. The flow of investment increased consumption, but it did not create real development.

A similar dynamic is working in many countries that export oil and natural gas. Reality is hitting. Hugo Chavez’s region ally, Ecuador, is now bankrupt. Market economies punish the “Clevelands” of the world — those governments that are unable to generate wealth, and can only provide a good life if someone else is financing it.

Of course, not everyone agrees. Tom has a post decrying that low oil prices means that Kazakhstan now has to generate wealth, instead of just pumping it out of the ground. This blank check financing is as out of date as when it was first proposed in United Nations garb in the 1970s and 1980s. Outside the subprime mortgage, oil finance, and UAW, however, I think most people realize this.

Don’t throw away money on the Clevelands of the world. Foreign oil dependency is a threat to American national security. We need to build a new electrical grid, both on land and under the sea. We need hydrocarbon substitutes, such as ethanol for flex-fuel vehicles and solar and wind for replacing natural gas powerplants. We need biodiesel stations and in-town electric vehicles.

We don’t need more Clevelands in this world.

The $350 Billion UAW Bailout

Rumors are swirling that President Bush may use Bush-Pelosi Bailout funds to save the UAW, General Motors, and Chrysler.

But even while Detroit is lobbying against local governments buying fuel-efficient vehicles and selling biodiesel trucks that aren’t, the Detroit 3 and their monopolist union supplier may be saved by this maneuver:

Bush may give funds to the Detroit bailout on the condition that Congress not refuse $350 billion more for Wall Street.

Detroit is in trouble because of its coddling of its unions, its incompetent management, its short-sighted use of government connections, and its love of debt.

Next up: a newspaper bailout? (courtesy gmgDesign)