April 08, 2009

Since the fall, auto sales have collapsed. This collapse has affected foreign manufacturers as well as American ones, and many countries are providing government loans and other assistance to their manufacturers. According to an Associated Press story from March, the European Investment Bank is going to give $4.9 billion in loans to European carmakers, and the EU is reviewing proposed aid packages from France, Britain, Spain, Germany, Italy, and Sweden to make sure they are in compliance with EU antitrust provisions.  Toyota and Honda have sought loans from the Japanese government, in part to finance car sales in America. Other countries view the auto industry as an important source of good-paying jobs and a vital component of the manufacturing base. American elites, both left and right, take a different view of the American auto industry, with the right despising it for employing unionized workers and the left excoriating it for making SUVs and trucks. Neither branch of the elite is much interested in appeals to the national interest, much less moved by national pride.

Even though our current economic problems were caused in part by the delusion that we could be even more prosperous with a “service economy” than we were with an economy based on making things, our elites remain at best indifferent to the fate of American manufacturing and the jobs supported by American manufacturing.  One would never know, from the scorn heaped on GM from all across the political spectrum, that Buick was just ranked in the top spot in JD Powers vehicle dependability survey, even as new GM products continue receiving rave reviews in an automotive press that has long been as hostile to American cars as the broader media culture is hostile to American traditions and values.  In fact, industry observer Peter DeLorenzo, who blogs as the Auto Extremist, has written that, under the tenure of Rick Wagoner—asked to step down by the Obama Administration—“GM saw its greatest design, engineering and product era since its glory days of the 60s.”

A good example of leftist disdain for the American auto industry was this weekend’s column by one-time drama critic and long-time drama queen Frank Rich. Rich, of course, was scathing in his criticism of a company that had “doubled down on sure-to-be obsolete S.U.V.s and trucks to serve a market transitorily in thrall with them.” But what particularly irked Rich was the suggestion, made forcefully by country singer John Rich (no relation to Frank, I’m sure) in his song “Shuttin’ Detroit Down,” that there is a moral distinction to be made between manufacturing and finance, between Detroit and Wall Street. One would think that John Rich’s view was simply common sense, since not even the most zealous of Detroit’s critics have suggested that it is responsible for the economic collapse that has wiped out trillions in paper assets since last year.  But viewing manufacturing as different from finance is a “romantic view” and a “sentimental illusion,” according to Frank Rich, at odds with the “new economic order” that Obama is trying to usher in, which so far has focused on “green jobs, health care, education, new financial regulation, infrastructure spending and all the rest.” (Looking at this list, it is no wonder that, even as the rest of the country is mired in recession, Moody’s projects that the economy of the DC metro area will grow by 2.5% from mid-2008 through mid-2010).

Notably absent from Rich’s list are private sector manufacturing jobs. They seem absent from Obama’s list, too. Just before he announced he was giving GM 60 days to get its house in order and Chrysler 30 days to merge with Fiat, Obama told CBS News that his goal was an American auto industry that was “much more lean, mean and competitive than it currently is.” As anyone remotely familiar with corporate buzzwords knows, “lean” and “mean” mean job losses, which seems a strange thing for a president supposedly in the pocket of organized labor to want. But Obama knows that the environmentalist faction in the Democratic Party is more powerful than manufacturing unions, and his major interest in the auto industry seems to be environmental.  As he announced in his speech on the auto industry, “I am absolutely committed to working with Congress and the auto companies to meet one goal:  The United States of America will lead the world in building the next generation of clean cars.” Indeed, his Administration has announced plans to increase federal auto fuel efficiency standards, known as CAFE standards, even though Obama’s auto task force found that “GM’s product portfolio is more vulnerable to CAFE standard increases than many of its competitors.” (Obama’s task force also continued the venerable Washington practice of praising foreign auto companies and denigrating American ones, claiming that “GM is at least one generation behind Toyota on advanced, ‘green’ powertrain development,” an assertion auto industry expert James Harbour says is flatly untrue, and criticizing the Chevy Volt as being unprofitable, even though it is widely believed, for example, that Toyota loses money on every Prius it sells, no matter how much the leftist elite loves that car). Thus, it appears that Obama is using the loans to GM and Chrysler to try to force them to make “green cars,” even though such a strategy is likely to make things worse for American carmakers. Also revealing is the fact that neither Obama nor Bush ever suggested using the loans to GM and Chrysler to encourage, much less require, the auto companies to shutter foreign plants rather than American ones, or to stop using foreign suppliers for parts, even though the only sensible reason for the loans is to attempt to preserve American manufacturing and American jobs and avoid the great social and fiscal costs that accompany their decline.

It did not need to be like this. The loan to Chrysler in the late ‘70s was intended simply to help the company weather tough economic times, not to change the type of cars Chrysler built. And Nicolas Sarkozy of France has indicated that, in view of the French government’s willingness to help the French car industry, engineering jobs should stay in France and any needed job cuts should take place at factories outside France. Unfortunately, American politicians, both on Capitol Hill and the White House, have used the auto industry’s travails as an excuse not only to tell Detroit what type of cars to build, but to unleash a torrent of ill-informed criticism whose only practical effect is likely to be a further erosion of American car sales. This is particularly unfortunate in Obama’s case, since he is well-positioned—perhaps uniquely positioned—to help Detroit regain lost market share. Obama is idolized in many of the parts of American society that are least likely to buy American cars. Japanese cars are most dominant in the big cities on the East and West coasts, the areas where Obama racked up his biggest margins last fall. Indeed, owning a foreign car is virtually a class marker for the upper middle class liberals who were a bedrock of the Obama campaign from the beginning. (An anecdote to bring this point home: a friend recently went to a birthday party for a niece being raised by his sister and her lesbian “partner” in suburban DC, and then to church in rural Maryland on the drive home from DC. Anyone who cannot guess which event was attended by people driving imports, and which event was attended by people driving American cars, hasn’t been paying attention). Given these demographic realities, if Obama made an impassioned plea for people to consider buying an American car, it might actually help Detroit. But Obama has not been willing to do this, and a plea to buy American made by anyone but Obama would likely be dismissed by the media as atavistic, reactionary, and perhaps even racist.

Among those most likely to sneer at any suggestion that Americans should buy American cars—or indeed at any statement not critical of the American auto industry—are the mainstream conservative media. Ever since the Congressional hearings on the auto loans last fall, such outlets as the Wall Street Journal and National Review have run piece after piece damning the American auto companies and praising their foreign competitors. Indeed, the mainstream right often takes umbrage at any suggestion that Toyota and Honda are not part of the American auto industry. Stephen Spruiell at NRO, speaking on behalf of the “100,000-plus Americans working for good pay in a foreign-owned automotive assembly plant in Indiana, Texas, Kentucky, Alabama, etc,” voiced his outrage at UAW president Ron Gettelfinger’s “characterization of the foreign brands as something separate from and hostile to ‘our industry.’” And the Wall Street Journal ran an editorial lauding the foreign plants in America as “America’s Other Auto Industry,” while clucking, “There’s no natural law that America must have a Detroit automotive industry, any more than steel had to be made for all time in Bethlehem, Pennsylvania, or textiles in New England.”  (In fact, other than financial journalism, it’s hard to find any job the Journal thinks needs to be performed here).

But the facts cited by the Journal in its editorial show why Gettelfinger was right to view foreign automakers as separate from, and even hostile to, the American auto industry, and why Americans should be concerned about the demise of that industry. As the Journal notes, “for every job created by the transplant producers, Detroit shed 6.1 jobs in the U. S., 2.8 of them in Michigan.”  So much for the Japanese creating jobs here. And those dependent on the American auto industry include far more than current employees: “for every UAW member working at a U. S. car maker today, three retirees collect benefits; at GM, the ratio is 4.6 to one.”  These figures not only belie the notion that what the Japanese have invested in America is comparable to what the Big Three have invested, they are a reminder that, if GM and Chrysler are forced into bankruptcy, the taxpayer is likely to pick up the cost of at least some of these retiree benefits. 

Perhaps most significantly, the Journal admits that the foreign plants were lured here in part by “tax breaks” and that, for the foreign automakers, “strategic decisions are taken and much of the value-added engineering and design is done back home.” In fact, state governments have lavished some $3.6 billion on foreign automakers, and Senators from those states were the most implacable in their opposition to loans for the Big Three, with Jim DeMint of South Carolina even voicing concern that foreign automakers would be “disadvantaged” by loans to Detroit. Some have even advocated dealing with the collapse of American carmakers by giving more tax breaks to the Japanese, in order to entice them to hire displaced Americans. There is a word for countries that bribe foreign countries to set up manufacturing within their borders, while allowing the engineering work to be done abroad. We call such countries “Third World.”  Indeed, our failure to protect the domestic manufacturing sector on which engineering depends, while simultaneously importing foreign engineers under the H1b visa program to depress engineering wages, combine to create a powerful incentive for Americans talented enough to be engineers to choose other professions.  As a high school friend who is a research chemist wrote in response to my initial piece on the auto bailout, “I have been seeing highly skilled research positions leave this country and put very qualified and educated people on the unemployment line all because they want to improve the bottom line.  So they send these jobs to other companies overseas. The American Chemical Society is worried about the lack of interest in science in America and the decreasing enrollment in colleges. Is it that difficult to see why the most intelligent youths of our country would skirt science and engineering when those industries seem to have no future here?  If we lose our manufacturing and all that it supports – research, engineering, skilled labor and teamwork – we lose what made us the greatest country in the world.”

All such concerns are pooh-poohed by those cheering for the auto industry’s demise, just as they pooh-poohed concerns over America’s embrace of a global free trade system that has been instrumental in decimating the auto industry and the rest of our manufacturing base. GM, Ford, and Chrysler rose to dominance in a national market system, the system advocated by the founders. The difficulties American manufacturing has experienced in a global market system should be seen as a warning that globalism is destructive of American prosperity, not as a call for Americans to leave behind manufacturing and engineering and embrace the Brave New World of the “service economy” where we will all grow rich by flipping houses and swapping debt. As long as we continue to embrace global free trade, assurances that the demise of old line manufacturing firms will be followed by something better through the process of “creative destruction” ring hollow. As Pat Buchanan used to quip in the 1992 campaign:  when the first George Bush promised he would create 3,000,000 new jobs, he never told us they would all be in Guangdong Province, China. In a lifetime spent in the industrial Midwest, I have seen plenty of metaphorical ashes from the ruins of old factories, but I’ve yet to see a phoenix.

It is true that it is already late in the day, and that much damage has already been done.  The American auto industry has been hemorrhaging jobs for years, leaving many devastated communities in its wake. Just last week, the Detroit News ran an article highlighting the social and human costs associated with the massive outmigration from Michigan, a state that has had a net population loss of 465,000 since 2001. The auto industry was foolish to assume it could ride out the tsunami of globalization that swamped so many smaller industries, just as the scribblers at National Review and the Wall Street Journal are foolish in continuing to insist that globalization is leading us to the best of all possible worlds.

It is not too late, though, to learn from what has happened. One way of doing this is thinking again about the issues raised by the late John Attarian, the socially conservative economist who wrote, nearly 20 years ago, that “America presents the disheartening spectacle of a nation seemingly hell bent on committing suicide through free trade and immigration.” At the heart of our national death wish Attarian detected what he termed “economism,” the belief that economic considerations, even short-term economic considerations, should always control, and that “noneconomic phenomena, such as national sovereignty, autonomy, identity, cultural continuity, or even maintaining one’s way of life undisturbed, are far less important, or even nefarious.”  Attarian’s argument was that such noneconomic phenomena were in fact of critical importance, and that “the best economic system is one which provides widespread opportunity for men to support families, enabling mothers to stay home, rear the children, supervise their activities, and see to their soulcraft.” The manufacturing firms being destroyed by globalization provided such opportunities, in addition to the possibility of living a life rooted in a community.  Obviously, I do not know what Attarian would have thought of federal loans to aid the American auto industry. But I do know that the elites of both Left and Right, in voicing their disdain for the American auto industry, have once again revealed their opposition to an economy ordered to provide for the values Attarian rightly identified as paramount.


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