Advertising Works: That’s Why Companies Spend So Much Money On It

This year 29 entrants will vie to qualify for the grand prize race for the 10 million dollar Automotive XPrize to be held next year in 2010. There will be two categories: mainstream (four passenger and at least a 200 mile range), and alternative (two passenger and at least a 100 mile range). The winners must “exceed 100 miles per gallon, meet strict emission standards, and finish in the fastest time.”

Entrants must meet several specifications intended to encourage designs that are safe, reliable, and desirable — at competitive prices. This is one attempt to address the coming ‘twin peaks’ of peak oil and global warming by encouraging the development of cars that use less gas and produce fewer harmful emissions. While not a long-term solution, a 100mpg car would help a lot while we await the development of a good mass transit infrastructure.

(Parenthetically, I still think the idea of ‘train ferries’ makes good sense: that is, we take the train  long distances with our little ‘runabouts’ loaded onto carrier cars behind us. Then, when we reach our destination we are comfortable and relaxed. We unload our little cars and can explore the area with great freedom and convenience.)

There are five general types of cars that have been accepted to compete for the Auto Xprize. Eleven of them are hybrids, nine use alternative fuels, such as diesel, compressed natural gas, ethanol, etc. Four are electric cars and one is the compressed air car. And four use regular gas.

Perhaps the most depressing thing about this list is that several of the entries use no new technology at all. In other words, it has been possible to make a 100mpg car for some time. As the Auto Xprize publicity says, the reason we don’t have these highly efficient cars already is that “increases in energy efficiency have been ‘spent’ on increased vehicle power, acceleration, and weight, rather than in increased fuel economy.”

You will hear American auto industry apologists arguing that they only built SUV’s and pickups because “the public demanded them”. Which conveniently ignores the fact that they bombarded us with advertising for big vehicles. Why?  Because their profit margin was much higher on them. That advertising convinced many of us.

We have a wasteful society because it has been (and is) profitiable.


Looming Challenges

People who make money from fomenting and exaggerating political controversy are having a marvelous time with the “stimulus package” President Obama just signed into law. But all the boom and sparkle of the fireworks they generate is, I believe, drawing attention away from issues that need clear analysis and appropriate action.

It should be clear, for example, that if we want public services we must pay taxes. It should also be clear that the tax policies of the last eight years have been disastrous to our economy. It then follows that more of the same will not make the economy better.

I would also like to point out that many companies are downsizing or closing altogether because of a lack of demand for their products. A lack of customers. Not enough people willing (or able) to spend money to buy what they are selling. This cannot be fixed by giving more money and incentives to those companies. The companies were doing well – they had products that had been successful – the problem is that ordinary people became so hard-pressed that they could no longer afford to support those industries.

The simple fact is, without a large population with disposable income to spend, our economy cannot work. Emphasis on the large. When the 10% already own 90% of everything, the 90% can no longer support them.

The rich need to wise up – if they want to live in a functioning capitalistic society, they must tax themselves and their corporations enough to support a large and active middle class of entrepreneurs and consumers. Without them, the system implodes, as the present crisis makes perfectly clear.

That said, it may be too late. I think the present financial crisis will turn out to be different from previous recessions, because the reasons behind it include a very significant difference – the looming challenges of resource depletion and climate change.

Neither of these can be met with our present strategies – including the “stimulus package” – and certainly not with “business as usual”. To the extent that the present package encourages green energy and relocalization it will help, certainly.

But we desperately need to be learning how to live abundant lives within a “steady-state” economy, not stimulating the financial sector to restart economic growth.

Bail Out Skipper! (before it’s too late!)

I live in metro Detroit, so believe me I understand the world of economic hurt the working class is in – we have already lived through several years of “recession” here. (I wonder how bad it has to get before the economists will call it a depression?) I also understand how many of us will suffer even more if one or more of the “Big Three” goes belly-up.

That said, the bail-out idea doesn’t appeal to me any more than it probably does to you. The “Big Three” management types have had years and years to read the handwriting on the wall and make appropriate business decisions. Honda, Toyota, et. al. have been stealing their market with better-built, more efficient cars for decades. And everybody knows it.

But Detroit management (looking out for themselves and the interests of their shareholders) chose consistently to go for the short-term gold. By that I mean the SUVs and trucks that were cheap to build and had a higher profit margin per vehicle. (You say that’s what people wanted? Can you say ‘marketing’?)

Of course the “Big Three” have higher labor costs than the imports. But make no mistake about it, what drove them into junk bond status was management’s consistent choice to maximize profits. And profits, my friends, enrich owners, not workers. (To be fair, insurance has proven to be a ruinous expense too – as it is for the rest of us under our present system – but that’s a whole ‘nuther topic.)

Now that they have bankrupted their companies while green-lining the pockets of the few, the “Big Three” management has decided to try for federal (read taxpayer) money to save them.

We don’t really need to talk any further about the three roaring into DC in their corporate jets to demand billions because “we’re just too big to fail” – the TV comedians have done a fine job. But as out-of-touch as that was, there is evidence that the whole auto corporate culture is even more out-of-touch than we could have imagined.

According to Reuters, local dealerships donated the use of three representative hybrid SUVs (a Ford Escape, a Chevy Tahoe, and a Chrysler Aspen) to a large local church. They were parked behind the pulpit, but in front of the choir. And the church full of auto-workers were exhorted to pray for a bail-out.

Are visions of the Holy Trinity dancing through your mind? Are you totally creeped-out yet? (Would you like to see Jesus doing a version of his “get the money-lenders out of my temple” bit?)

Are we Number 1?

Yes, if the question is “Who uses the most energy in the world?” We do! Or “Who values competitiveness the most?” We do! Or “Who spends more on the military than almost everyone else in the world put together?” We do! Or “Who has the biggest percentage of their population in prison?” We do! We’re Number 1!

But what about if the questions are about quality of life for our people? Well, there we don’t fare so well.

  • Life expectancy at birth? We’re #41.
  • Health system? We’re #37.
  • Healthy life expectancy? Were #24.
  • Home ownership? We’re #7 (that was back in 2003 though, before the bubble burst.)
  • Child well-being (rich countries only)? We’re #20 (out of 21).
  • Environmental Protection Index? We’re #39.
  • Greenest countries – Most Livable Places? We’re #23.
  • Global Peace Index? #96 (well, no surprise there).
  • Freedom of the Press? #9.
  • Literacy? Also #9 — although because of many ties, there are actually 20 countries ahead of us.

As for privacy — in 2006, in a privacy study we ranked at the bottom with other “surveillance societies” like Russia and China in the categories of “statutory protection”, “privacy enforcement”, “workplace monitoring”, “transborder travel and finances”, “leadership”, and “communications interceptions”. Across the whole study we ranked second from the bottom as an “Extensive Surveillance Society” — just below “Systemic Failure to Uphold Safeguards” but still above the last place “Endemic Surveillance Society”.

We have a massive national debt that is costing us (as taxpayers) billions just to pay the interest. We have more unemployment and a higher percentage of people below the poverty line than other “developed nations”. Most of our jobs are in the service sector, as opposed to agriculture or manufacturing. In fact, our agricultural workers are almost too few to even show up in the stats and our industrial production growth in 2007 matched that of two other countries — Belize and Zimbabwe!

I think, as a people, we would really like to do better than this. Wouldn’t we?

Them That’s Got Shall Get

A large and prosperous middle class has long been a hallmark of America. Not for us the split between royalty and peasants.

Well, those days are gone.

In 1980, corporate CEO pay was 40 times that of the average worker in America. Now it is about 400 times as much, and about 800 times as much as a minimum wage earner. “In other words, the average CEO earns more before lunch on the very first day of work than the minimum wage employee earns all year.”

While the majority of us have been steadily loosing ground in the economy, the super-rich have been taking giant bites. Since the 1970’s, almost all of our economic “growth” has been growth for the wealthy, and shrinkage for the rest of us.

“Them that’s got shall get.
Them that’s not shall lose.
So the Bible says,
And it still is news.”

God Bless the Child.    Billie Holliday

Corporate CEOs with their astounding salaries, bonuses, perks and so on are really only the underbelly of the rich though. The top twenty private equity and hedge fund managers “pocketed an average income [in 2006] of $657.5 million or 22,255 times the pay of the average worker.” (Bail out, anyone?)

In 2006 — the last year for which we have figures — in the United States the top 1% of the population owned more than 1/3 of the wealth of the entire country, and the top 5% owned almost 60% — and growing. That left the remaining 95 percent of us to somehow split up the remaining 40% of the wealth. This is the greatest inequity in the U.S.A. since before World War II — think Robber Barons and the Great Depression. Perhaps, as a society we didn’t really learn our economic lesson from those times.

In 2007 our U.S.A. GINI Index score was 45. The GINI Index — a measure of income equity — scores from 1 (best) to 100 (worst). Our near neighbors on the Index (from 44.5 to 46) were the Phillipines, Kenya, Cote d’Ivoire, Camaroon, [USA] Uruguay, Jamaica, Uganda, and Equador.

Welcome to the “Third World”, folks.

It is facts like this that caused Warren Buffet (that radical populist) to say in a New York Times interview, “There is class warfare all right, but it’s my class, the rich class, that’s making war, and we’re winning.”

And it’s not just about money. It’s about quality of life, access to education, even about staying alive. In 1980, the richest Americans had a life expectancy 2.8 years longer than the poorest. By 2000, that gap was 4.5 years.

Wake up, folks. It’s not really about abortion rights or gay marriage, or anything like that — those are simply the tired old ‘divide and conquor’ issues we have been fed. It’s about establishing a good quality of life for people — for all people — not just the wealthy few.

Get a look at how the British see us at