Publications

I’ve included my writing for the American Institute for Economic Research. Daily Economy blog.

The Economics of Automobile Safety
By R. D. Batesole

Original article: The Economics of Automobile Safety

The 1950s and ‘60s were defining decades in the evolution of automotive safety in the United States. Prior to the ‘50s, little thought was given by the industry to passively protecting passengers in the event of a crash. But despite resistance from the American auto industry, safety eventually won out, by popular demand of the U.S. consumer.

Some auto manufacturers’ names evoke a visceral sense of safety. SAAB, Volvo, Citroën, Mercedes, Rover, and others devoted much of their energies to designing and building cars that were both inherently safe and crash-worthy.

You’ll notice that these cars and their makers all hail from Europe. Their influence on critical U.S. auto safety design and application cannot be overlooked. SAAB had been building military aircraft and incorporated some of the design features into their cars. Volvo built engines and military vehicles for the Swedish government during World War II.

Volvo engineer *Nils Bohlin had spent much of his career in aviation, and used techniques learned in that industry to develop the three-point safety belt that would cover the driver’s torso and lap, essentially creating the seat-belt system found in almost all passenger cars today. Mercedes created crumple zones; SAAB developed a safety cage and dual diagonal braking; Citroën had its unibody construction, unique hydropneumatic self-leveling suspension, disc brakes and Michelin radial tires. European cars were at the forefront of safety technology.

After my life flashed before me during an accident with a Mini (yes, also from Europe but designed as a city car), safety was paramount in any car buying decision. In late 1974 I was without transportation, or for that matter, much money. I opened my wallet and two twenties fluttered to the table.

I picked up the newspaper and after a few minutes of searching saw an ad for a 1966 SAAB 96 two-stroke. I knew little about SAABs (Svenska Aeroplan Aktiebolaget), but what I did know was that safety was an essential part of its brand. The two-stroke was advertised at a budget-crushing price of $70. Undeterred, I rang the number and was told the car was available and could be seen immediately.

Borrowing my Dad’s Volvo, I drove the three miles into town to have a look. It was mole grey and somewhat forlorn, with the driver side “B” pillar pushed in from what looked to be a recent accident. I did a quick reconnoiter and didn’t see rust or a reason to reconsider. I figured I could fix the damage, and after the owner talked himself down from the initial $70 to $40, I handed over the money. I picked up the SAAB the next day, and very quickly came to appreciate the design ethic and its surefootedness in waist-deep snow. Over the next twelve years, I owned a number of SAABs, all second (or third) hand.

It took some time for U.S. consumers to catch on to the virtues of safe, if more expensive, vehicles. In this country, the challenge of incorporating safety equipment was initially seen neither as a betterment of society through auto safety nor inevitability. It was piecemeal at best, and it was Preston Tucker and his Tucker 48 (not one of the big three) that introduced safety belts and padded dashboards to American roads, albeit in very limited numbers, in the late 1940s.

Ford, Nash, Chrysler, and Buick offered seat belts as optional equipment during the 1950s. For the 1956 model year, **Ford offered to pad the dashboard and install seat belts for any consumer willing to pay an additional $27. Very few customers signed up. Ford eventually succumbed to complaints from a GM executive that the safety-focused ads took the romance out of the car business.

In the 1950s, GM was refusing to offer seat belts, saying there was no conclusive evidence that the belts helped prevent auto injuries. Ford decided to focus on styling and performance rather than safety. While dealers certainly didn’t push them, and while safety experts claimed it would only cost 50 cents to install mounts so drivers could add the ***belts themselves, U.S. manufacturers just weren’t interested.

In November of 1965, “Unsafe at Any Speed: The Designed-In Dangers of The American Automobile” was published. Written by Ralph Nader, the groundbreaking book castigates U.S. car builders for their systemic resistance to the introduction of safety features.

Its first chapter is titled “The Sporty Corvair.” It details the design of the first iteration (‘60 – ‘64) Chevrolet and its swing-axle rear suspension, which was suspected of causing instability under certain driving conditions.

Even before the release of the book the industry did show a willingness to change. Chevy modified the swing axle for the 1964 model, and in 1965 it was completely redesigned to a fully independent rear suspension maintaining a constant camber angle. This allowed the rear wheels to continually remain parallel to the road surface. Ultimately, because of its shortcomings, the swing axle was replaced industry-wide in the United States by the fully independent suspensions that are commonplace today.

There were also times when changes were needed but nothing was done. The Ford Pinto, with its propensity for bursting into flames during low-speed rear-end collisions, is one example.

Over time, Americans came to value the safety offered by the European cars, and the domestic industry had to play catch-up. Through public awareness and acceptance, things began to change. In 1966, the ****National Traffic and Motor Vehicle Safety Act was ratified. The act mandated federal safety standards for motor vehicles and empowered the federal government to set and administer new safety standards. Changes in both vehicle design and driver behavior began to reduce crashes and injuries.

In the U.S. we still lose far too many people to automotive-related deaths. The latest available number, for 2015, is just above 35,000, but that was 20,000 fewer per year than in the early 1970’s, and it is certainly headed downward as the application of technology to the design and construction of cars continues, with safety as its overarching goal.

Ultimately the U.S. car-buying public was offered and accepted safer cars and was willing to pay a somewhat higher price for the inclusion of these safety features. The process was generally evolutionary over a period of many years but it reached a critical mass in the late 1950’s and 1960’s. Once consumers realized the true benefits of safety equipment in cars, there was no going back to a simpler, carefree time.

References
*http://www.cnn.com/2016/12/19/autos/car-innovations/index.html
**http://americacomesalive.com/2013/10/01/the-crusaders-who-campaigned-for-car-safety/
***http://www.secondchancegarage.com/public/seat-belt-historya.cfm
****https://en.wikipedia.org/wiki/National_Traffic_and_Motor_Vehicle_Safety_Act

 

The MINI: At Globalization’s Crossroads
By R. D. Batesole

Original article: The MINI: At Globalization’s Crossroads

Not too long after World War II, the United Kingdom was second only to the United States as the largest builder of cars, and the biggest exporter.

Think about the world order in those days: This was before the auto industries of Japan and Germany, or for that matter, China began exporting their products.  Auto factories throughout much of Europe were in their post-war ruins. England saved its steel for its own major exporting businesses – notably, cars.

And in postwar America, returning GI’s and their baby-booming families demanded more new vehicles than the American auto industry could supply.

The British cornered the market on the sports car. Iconic names like MG, Riley, Singer, Triumph, Sunbeam and Austin Healey had the ability to make Americans swoon with their top-down, low-cost, cheeky by-the-mile fun.

The future looked very bright indeed; yet less than three decades later, most of these brands were gone: either swallowed up in another merger, or in receivership.  What might have looked like labor unrest or supply chain problems or even unimaginative design from the perspective of 1970s U.K., is today more clearly understood as the impact of globalization. Lower cost structures in developing economies put pressure on U.K. producers and resulted in labor disputes with management and the government, quality issues, supplier problems. Furthermore, investment in production facilities in developing countries increased competition and U.K. producers were sometimes slow to respond, which contributed to uninspired new products at higher price points.

In the years that followed, England lost ownership of many of its storied marques. Jaguar and Land Rover went to Tata Group of India, Rolls-Royce to BMW, and venerable Bentley to Volkswagen.

There is one car perhaps more than any other that embodies the many facets of globalization. Of all the vehicles the U.K. has produced through the years, none speaks more clearly to the British automotive story than the Mini (see sidebar). Designed by Sir Alec Issigonis and launched by BMC (British Motor Corp) in 1959, it captured a nation’s heart.

If any car can be said to have driven the “Swinging Sixties,” it was the Mini. Peter Sellers, The Beatles, Twiggy, James Garner, and Steve McQueen were all owners. It had a starring role in the 1969 film “The Italian Job” with Michael Caine. The Mini’s impact today is still both visceral and immediate.

The last “classic” Mini came off the line in October 2000. BMW of Germany had acquired Rover in 1994 from British Aerospace and in 2001 began building the new generation MINI at its Oxford, U.K. facility. The re-design, including larger wheels, was still based upon the revolutionary front-wheel-drive, transverse engine, combined sump and gearbox platform. These cars and the many variants now available have been highly successful in both the U.K. market and abroad.

It is not too far a leap to say that there has been something of a resurgence in U.K. car production within the past several years. A few of these marques are niche English brands, such as Morgan, TVR, AC and Bristol that were essentially too small to have been impacted by the larger forces of globalization.

A number of other companies build their cars in the U.K., including Honda and Nissan, much like those companies have opened factories in the United States. This is another aspect of globalization.

But in the wake of this summer’s vote for Britain to leave the European Union, the future of England’s motor industry is again somewhat clouded. Brexit could make it more challenging for the U.K. to get parts from other European countries, and to export finished cars to those countries. While BMW officials say they “will not speculate about the outcome of the Brexit negotiations,” observers have noted that the company, with factories throughout Germany and on four continents, will face pressure to keep production in place because of the MINI’s British heritage.

So globalization has been the archetypal blessing and curse of the Mini brand and others. Without the capital and reinvestment by foreign governments and entities, the country’s motor industry could look quite different.

Ask the average Briton and they will probably say they would much prefer to return to the England of the 1960s when 1,000,000 people made British-owned cars in the U.K.

A distant second, but certainly preferable to no industry at all, is the reality of the day. There are 800,000 people involved in designing, engineering, manufacturing and mending motor vehicles as well as making components for them.

With Brexit on everyone’s mind, the specter of a much smaller workforce than what is now required is ever-present. Some iconic brands are gone and others will never again be part of the empire. How the current workers fare will be the next chapter in the story of globalization.

 

Can U.S. Automakers Crack the Cuban Market?
By R. D. Batesole

Original article: Can U.S. Automakers Crack the Cuban Market?

Most of us have become familiar with the sun-drenched scenes of Cuba’s classic automotive transportation. The easing of relations with the United States could at long last herald changes in the fleet of cars on Cuban roads. Here is a little backstory on that history to propel us forward.

Fidel Castro and his revolution came to power on January 1, 1959. After several unsuccessful attempts, Castro ousted the dictator Fulgencio Batista and his supporters who fled Cuba to the Dominican Republic.

Shortly thereafter, as Castro began to ally with the Soviet Union, the United States imposed a trade embargo which is only now, 50-plus years on, under reconsideration. If Cuba is not the birthplace of the saying “Necessity is the mother of invention,” it has proven the adage daily since the embargo began.

Prior to September 2011, only automobiles that were in Cuba before the 1959 revolution could be freely bought and sold. For decades, the sale of a car by a State dealer to a Cuban citizen required approval by a governmental agency. Foreigners also needed authorization signed by “the agency that serves them” in Cuba.

The Cuban people have been living in a “Happy Days”-era auto time warp. In a land where planned obsolescence is an unknown commodity, almost every make and model of vintage American iron is on display. Far beyond basic transportation, these cars were, and are, an expression of creativity, individualism and dogged determination, a slap at the sterility and oppressiveness of the regime.

What about other cars, you ask? What alternatives to pre-1960 U.S. cars have been available?

The Communist system is known for their ability to produce “interesting” vehicles and Cuba certainly wouldn’t be complete without their poor to wincingly bad state-sanctioned cars. Mercifully it’s a short list of the Russian Moskvitch 2141, GAZ 2410 and VAZ 2105, along with several others including the Polski Fiat 126p and the French Peugeot 405. The Peugeot is apparently quite common and very popular. I owned the 16-valve version of this car in the late 80’s and can attest to its peppy performance and styling.

Jay Ramey is an Associate Editor with Autoweek, and he suggests that “Cuba’s streets may be famous for American classics from the 1950’s, but there’s more to it once you dig a little deeper.

In January, the Cuban government began selling new and used vehicles to anyone with the money to buy one. But even under those recent reforms, a 2013 Peugeot sedan was priced at more than $250,000, and a 2010 Volkswagen Passat cost $70,000, according to a report earlier this year by National Public Radio.

Karl Brauer, the senior analyst for Kelley Blue Book, noted that “the country is still ruled by a communist regime, and access doesn’t mean economic capability.”

Cuba’s citizens are eager to buy new or newer American products, as much as U.S. automakers would certainly like to satisfy their transportation needs. But the reality is there is still a significant transition from a state to a market economy that has to occur. In a country where automobile ownership for decades has been and continues to be, a luxury afforded by a very few, it seems that time, patience and a little luck will play a significant role.

 

How Many Angels Can Dance On The Head of Our Economic Pin?
By R. D. Batesole

Do you remember this theological question from your Middle Ages studies?

It seemed to me at the time that it was another of those fascinating ways that people in this period had of trying to explain the world around them. Something akin to spontaneous generation which posits that a living organism, usually a flea or maggot, could arise from inanimate matter, e.g. dust or rotting meat. The angel’s question has been viewed both as a literal mechanism for determining size but also a means to discredit the philosophy of the day.

Brought into our time it can be used as a metaphor for those exercises that are wholly without practical value. In this general election year does anything come to mind?

Both major party candidates have been discussing their approach to employment and job growth in particular. You could perhaps be forgiven for thinking that this might be one area where there was some bipartisan overlap or even outright agreement. And you might be rewarded.

Much of the conversation seems to revolve around the ‘golden age’ of American manufacturing. Those twenty-five years or so just beyond the second world war through the late sixties. It encompasses the thinking that you can revive whole industries that have either shuttered their doors or are on the brink of doing so. It ignores the realities of the past and arrives at an alternate future. As election year stump banter it might be viewed as reasonably innocuous. However in this election cycle it unfortunately also gives false hope and possibly feeds resentment to segments of the workforce.

There is actually some consensus on trade policy. Both candidates have recently voiced opposition for the TPP (Trans-Pacific Partnership) but have generally favored trade agreements they feel enhance America’s interests. The scope of the TPP is quite broad with 12 signatory nations and a little too complex to unpack in this article. It is, in part, designed to reduce tariffs and increase environmental protections. Whether in fact this will be the case is part of the ongoing, somewhat contentious, debate.

N. Gregory Mankiw is a professor of economics at Harvard. He and 13 other economists recently penned a letter to members of congress:  The Wisdom of Free Trade

They wrote, “International trade is fundamentally good for the U.S. economy, beneficial to American families over time, and consonant with our domestic priorities. That is why we support the renewal of Trade Promotion Authority (TPA) to make it possible for the United States to reach international agreements with our economic partners in Asia through the Trans-Pacific Partnership (TPP) and in Europe through the Trans-Atlantic Trade and Investment Partnership (TTIP).”

Most economists and policy makers favor free trade over tariffs or trade barriers. It is generally felt that they decrease economic efficiency. This assumes a level playing field and some countries that might publicly espouse free trade could also be subsidizing certain areas or industries they wish to protect. Hence the opportunities and pit-falls of free trade and an agreement that is fair and beneficial for all parties concerned.

Jobs and trade policy are only two of many domestic and international challenges we face as a country. If the electorate does their homework the information they need to make an informed decision on November 8 is available no matter their political proclivity.

 

Hat-Tricks and Economic Bullets
By R. D. Batesole

The White Star Hat-Trick is really a story about dodging a bullet. What makes it so compelling is that this happened not once but three times to one very lucky person. You may know the story. It starts with the RMS Olympic, a White Star Line ship, and a stewardess Violet Jessop. The year was 1910 and Jessop began her career with White Star. She was assigned to the Olympic, a luxury ship that was the largest civilian liner at that time. Olympic was built by Harland & Wolff on the same slipways that would soon launch the Titanic. The Olympic sailed from Southampton on September 20, 1911. Shortly thereafter she collided with the HMS Hawke, a British warship. Both ships were badly damaged but neither sunk and there were no fatalities.

In April of 1912 the RMS Titanic sailed from Southampton to Cherbourg, France and then on to Queenstown, Ireland. This was her last port of call. She left Cobh (Queenstown) on April 11 on her maiden voyage to New York. Violet Jessop had boarded the day before and, as on the Olympic, was serving as a stewardess. Late Sunday night April 14 and the sea was flat as a mill pond. The Titanic was moving through the frigid water at 23 knots. Most of the ship’s passengers had turned in for the night. Jack Phillips, the wireless Marconi operator, was working to clear a backlog of passengers’ personal messages to friends and loved ones. The ship hit the iceberg at 11:40 pm. Within minutes it was all too clear to Captain Edward Smith that the Titanic wouldn’t survive. With no public address system stewards raced from first and second class cabins to alert passengers. Jessop was given the order to go on deck. She was told she would function as an example of how to behave for the non-English speaking passengers. She was later ordered into life boat 16.  She, along with 705 of her fellow passengers and crew, were rescued by the Cunard liner Carpathia in the early hours of April 15.

The fate of the Britannic, the third ship in our story, is not so well known as Titanic. She was to be called Gigantic and was an Olympic class liner very similar in dimension and fitment to her sisters. After Titanic’s demise she was renamed Britannic with modifications that included additional life boats and bulkheads that were extended to the Bridge deck.  She was launched in early 1914. Within months Europe was at war and the great ship languished in Belfast. In November of 1915 the British government requisitioned her as a hospital ship. On the morning of 21 November 1916 the HMHS Britannic was sailing through the Aegean Sea near the Isles du Kea. Violet Jessop was working for the British Red Cross as a stewardess aboard the ship. There was an explosion and the White Star liner sank in less than an hour. To this day there is no clear evidence as to whether she struck a mine or was the victim of a German torpedo. Thirty were killed and Violet received a traumatic head injury. She survived and became the first and only person to achieve what became known as the White Star Hat-Trick.

Are we going to dodge the economic bullets that are potentially targeting us in their sites? Whether Brexit & the EU, a DJ Trump presidency, sluggish jobs market or some combination of the above we can only hope we have a bit of Ms. Jessop’s luck and timing to survive our own economic hat-trick.

 

Taking the pulse of the economy with zombie films
By R. D. Batesole

A different type of metric to be sure but there is certainly experiential and empirical observation to back this up. That is the number of horror films of the walking dead variety increase both exponentially and inversely to the perceived health of the economy. You don’t need a degree in brain surgery to puzzle out the cause. One primary reason is that people immensely enjoy being scared. Well if that’s the case you say then what could be scarier than an economy on the ropes. Pretty scary but that is the point. It’s also very real, much too real to be enjoyed except by those that self-identify as economic masochists. Zombies present a simpler world where you don’t need a trained eye to separate the good guy from the ghoul. It’s grand escapism, visual popcorn. And your 401k is not on the line.

 

All stories were written by Robert Batesole and edited by Robert Batesole and Aaron Nathans (Former Communications & Public Affairs Manager AIER.org)