How Washington Ruined Detroit
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Who killed the U.S. auto industry?
To hear the media tell it, arrogant corporate chiefs failed to foresee the demand for small, fuel-efficient cars and made gas-guzzling road-hog SUV’s no one wanted, while the clever, far-sighted Japanese, Germans, and Koreans prepared and built for the future.
I dissent. What killed Detroit was Washington, the government of the United States, politicians, journalists, and muckrakers who have long harbored a deep animus against the manufacturing class that ran the smokestack industries that won World War II.
As far back as the 1950s, an intellectual elite that produces mostly methane had its knives out for the auto industry of which Ike’s treasury secretary, ex-GM chief Charles Wilson, had boasted, “What’s good for America is good for General Motors, and vice versa.”
“Engine Charlie” was relentlessly mocked, even in Al Capp’s L’il Abner cartoon strip, where a bloviating “General Bullmoose” had as his motto, “What’s good for Bullmoose is good for America!”
How did Big Government do in the U.S. auto industry?
Washington imposed a minimum wage higher than the average wage in war-devastated Germany and Japan. The Feds ordered that U.S. plants be made the healthiest and safest worksites in the world, creating OSHA to see to it. It enacted civil rights laws to ensure the labor force reflected our diversity. Environmental laws came next, to ensure U.S. factories became the most pollution-free on earth.
It then clamped fuel efficiency standards on the entire U.S. car fleet.
Next, Washington imposed a corporate tax rate of 35 percent, raking off another 15 percent of autoworkers’ wages in Social Security payroll taxes
State governments imposed income and sales taxes, and local governments property taxes to subsidize services and schools.
The United Auto Workers struck repeatedly to win the highest wages and most generous benefits on earth — vacations, holidays, work breaks, health care, pensions — for workers and their families, and retirees.
Now there is nothing wrong with making U.S. plants the cleanest and safest on earth or having U.S. autoworkers the highest-paid wage earners.
That is the dream, what we all wanted for America.
And under the 14th Amendment, GM, Ford, and Chrysler had to obey the same U.S. laws and pay at the same tax rates. Outside the United States, however, there was and is no equality of standards or taxes.
Thus when America was thrust into the Global Economy, GM and Ford had to compete with cars made overseas in factories in postwar Japan and Germany, then Korea, where health and safety standards were much lower, wages were a fraction of those paid U.S.
workers, and taxes were and are often forgiven on exports to the United States.
All three nations built “export-driven” economies.
The Beetle and early Japanese imports were made in factories where wages were far beneath U.S. wages and working conditions would have gotten U.S. auto executives sent to prison.
The competition was manifestly unfair, like forcing Secretariat to carry 100 pounds in his saddlebags in the Derby.
Japan, China, and South Korea do not believe in free trade as we understand it. To us, they are our “trading partners.” To them, the relationship is not like that of Evans & Novak or Fred Astaire and Ginger Rogers. It is not even like the Redskins and Cowboys. For the Cowboys only want to defeat the Redskins. They do not want to put their franchise out of business and end the competition — as the Japanese did to our TV industry by dumping Sonys here until they killed it.
While we think the Global Economy is about what is best for the consumer, they think about what is best for the nation.
Like Alexander Hamilton, they understand that manufacturing is the key to national power. And they manipulate currencies, grant tax rebates to their exporters, and thieve our technology to win. Last year, as trade expert Bill Hawkins writes, South Korea exported 700,000 cars to us, while importing 5,000 cars from us.
That’s Asia’s idea of free trade.
How has this Global Economy profited or prospered America?
In the 1950s, we made all our own toys, clothes, shoes, bikes, furniture, motorcycles, cars, cameras, telephones, TVs, etc. You name it. We made it.
Are we better off now that these things are made by foreigners? Are we better off now that we have ceased to be self-sufficient? Are we better off now that the real wages of our workers and median income of our families no longer grow as they once did? Are we better off now that manufacturing, for the first time in U.S. history, employs fewer workers than government?
We no longer build commercial ships. We have but one airplane company, and it outsources. China produces our computers. And if GM goes Chapter 11, America will soon be out of the auto business.
Our politicians and pundits may not understand what is going on. Historians will have no problem explaining the decline and fall of the Americans.
COPYRIGHT 2008 CREATORS SYNDICATE INC.
[...] I dissent. What killed Detroit was Washington, the government of the United States, politicians, journalists, and muckrakers who have long harbored a deep animus against the manufacturing class that ran the smokestack industries that won World War II. [...]
The power to tax and regulate is the power to destroy.
http://rightklik.blogspot.com/
Normally, I love Pat, but this is crap.
“GM and Ford had to compete with cars made overseas in factories in postwar Japan and Germany, then Korea, where health and safety standards were much lower, wages were a fraction of those paid U.S.
workers”? You talk as if America’s car companies started crumbling because of competition in 1952, when Japan was still recovering from being made into a third-world nation by years of war. But Japanese cars didn’t seriously start competing with American cars until the late 1970s, by which time Japan was fully recovered from the war and Japanese wages and working conditions were in the same ballpark as those in America. It was also when Detroit started screwing its loyal customers by making lousy cars. Nothing about Japan made the quality of American cars go into the crapper in the 1970s. The Big three got big and complacent, and got eaten alive by a competitor who made a better product at a better price. It’s called capitalism.
Ever driven a Trabant, Pat? That’s what happens to an auto industry when capitalism isn’t allowed to work.
While I agree with some of what Mr. Buchanon says in his blog entry, I do feel that he failed to mention several points that are arguably just as important.
1) Quality
When I was a child the first thing I remember learning about the men in my family was wether they were Ford men or Chevy men. To say that their loyalty to these brands ran deep is an understatement at best. To the men in my family and the countless others like them, these brands represented America and all that was good about it. But even the most loyal of patrons will only suffer so much before he or she says enough. For my father–a Ford man–this point came after he spent his hard earned money on two consecutive lemons–an early 1980’s Ford Escort that spent 211 days in the shop during the first year he owned it, and later a Ford Ranger pickup on which all of the paint peeled off before the truck was two years old.
I still remember walking into the Toyota dealership with him in the early 1990’s when he decided he would try one of those, “other brands.” I think it was the closest he ever came to crying in front of me; however, the fact that almost twenty years later he still has the truck he purchased that day is by far the most salient point. As he is now and forevermore a Toyota man.
While I have seen some argue that the union workers and government regulation made it impossible for the domestic automakers to build reliable cars. Ultimately, I think this line of reasoning is a non sequitur. If Americans can build the most advanced and safest assembly plants, then why is it that the products coming off those lines cannot be of similar quality.
2) It wasn’t just union workers who got sweetheart deals from the big three. As an example, my grandfather had a cousin who was white collar (though non-management) worker at Ford for over forty years. In those forty years he must have received at least 100 vehicles at little or no cost. In addition, said cousin also had a bit of a problem with alcohol. So much so that I would estimate that he missed at least five years worth of work during the forty years that he was employed at Ford. Yet, the higher ups continually made excuses for his excesses and sent him to the best rehab facilities in the country on the companies dime on at least ten occasions.
I suppose ultimately my point is that it was a combination of factors, and not any single one, which have brought the domestic automakers to the point of insolvency. And if there is to be a turnaround all of these factors must be addressed.
Another great column from a rarity–a national figure who actually cares about America and Americans.
Best line of the column: “an intellectual elite that produces mostly methane.”
Wow some people realy hate america don’t they. This guy is actually bitching that the governemnt is why auto workers were paid better than in other countries and had safer work environments? They imposed taxes? Oh wahhhh. What good is that rattle trap from GM if there is no road to drive on?
‘The United Auto Workers struck repeatedly to win the highest wages and most generous benefits on earth — vacations, holidays, work breaks, health care, pensions — for workers and their families, and retirees.’
Good for them. Apparently you noble class lovers are only concerned with GM being profitable not the well being of those who make it profitable. Keep bowing to the ‘job creators’. Just don’t take it personally if I kick you square in the ass when you do.
Charles Wilson was Ike’s Secretary of Defense, not Treasury.
The thing is that Washington made Detroit in the first place. Pat misses the same point as the liberal Thomas Sugrue in “The Origins of the Urban Crisis”, which is that Detroit only ever was what it was because of the military-industrial complex.
As the old Pete Seeger ditty went which became a favorite taunt of the New Left toward the Old Left – “It’s that UAW-CIO, makes the army roll and go!”
rawshark;
Good for them, as long as their company is profitable. Not good for them when their company is going out of business. Yes, I agree that executive bonuses should go first, but when it’s pay cuts or unemployment, people have to get realistic.
Let us not forget that most of the imported cars in America come from three countries: Japan, South Korea, and Germany. What do these countries have in common? They’ve all benefited from having their defense subsidized by Uncle Sam, thereby freeing up public monies to invest in industries and welfare.
America, in turn, in “exchange” for protecting these countries, has openned up its markets to their products, regardless of whether this is reciprocated or not.
Libertarian Ivan Eland pointed out the absurdity of this arrangement in Ungrateful Allies:
“Despite plundering their colonies at gunpoint (for example, the Spanish Empire looted the gold from Latin America) and creating sheltered markets for their goods overseas (for example, British mercantilism), even the formal empires of old were not cost-effective, according to classical economists. The informal U.S. Empire that defends other countries abroad using alliances, military bases, the permanent stationing of U.S. troops on foreign soil, and profligate military interventions is even more cost-ineffective. U.S. forces cannot plunder, and rich allies, such as South Korea, excessively restrict their markets to U.S. goods and services.”
Most of the imported cars in America come from three countries: Japan, South Korea, and Germany. What do these countries have in common? They’ve all benefited from having their defense subsidized by Uncle Sam, thereby freeing up public monies to invest in industries and welfare.
America, in turn, in “exchange” for protecting these countries, has openned up its markets to their products, regardless of whether this is reciprocated or not.
Libertarian Ivan Eland pointed out the absurdity of this arrangement in Ungrateful Allies:
“Despite plundering their colonies at gunpoint (for example, the Spanish Empire looted the gold from Latin America) and creating sheltered markets for their goods overseas (for example, British mercantilism), even the formal empires of old were not cost-effective, according to classical economists. The informal U.S. Empire that defends other countries abroad using alliances, military bases, the permanent stationing of U.S. troops on foreign soil, and profligate military interventions is even more cost-ineffective. U.S. forces cannot plunder, and rich allies, such as South Korea, excessively restrict their markets to U.S. goods and services.”
Shark has it right.
On the other hand, I can’t believe that Robert is faulting GM for treating his uncle like a human being instead of a thing..
No, Robert and too many others say, the bosses must never treat any worker decently because Darwub was right about survival of the most ruthless. The very rich are very much better than the rest of us precisely because they are totally greedy. If someone has a personal weakness, then Americans should just l just step over his body when he is dying of hunger or illness..
Or just pass by the sick and dying, like the Jewish priest and the Jewish Levite in Jesus’ parable of the good Samaritan.
Some morons keep saying “bankruptcy would be OK; look at the airlines”. Yeah, as in Pan AM, Eastern, and TWA. How can anyone so stupid and still chew gum?
To blame Germany, Japan and Korea for not bankrupting themselves, the way we have, by squandering gargantuan sums on a U.S.-styled, corrupt military industrial empire is idiotic. They don’t want, or need, our military protection; we spend it “on them” not because they need it, but because military industrialists in the USA have effective lobbyists in congress that keep passing the pork.
Oh, and free markets?
The USA was the most protectionist country on earth until 1945 and we had our greatest rates of growth during periods of protectionism. (See Cambridge economics professor, H. Chang’s newish book, “Bad Samaritans.”) So much for the “Washington consensus,” “neoliberalism,” Milton Friedman, etc.
Detroit’s management, and not the union members, sunk our auto industry. It was the former that turned over car making from “car guys” to marketers; management that ignored the wishes of consumers for reliability and fuel efficiency; management that tried to block imports and so fend off the inevitable.
Owners/managers have only themselves to thank for their plight and sending them money won’t solve the problem.
When Reagan took office, the average CEO made 43 times what the average “line worker” made. Now the average CEO makes over 400 time what workers on the line make. And yet, there is endless bitching at workers for being overpaid!
GAguilar