Tag Archives: Auto Industry

Southern Comfort

If you’re looking for some interesting (and occasionally infuriating) liberal commentary on the South’s political and cultural influence, I recommend this diary from OpenLeft, this article from Salon, and this entry from the Democratic Strategist.

Here’s a provocative excerpt from the Salon article:

Today the division is no longer between slave and free states, or agrarian and industrial states, but between two models of industrial society — the Northern model, based on adequate public service funding and taxation and unionization, and the Southern model, based on low-tax, low-service government and low-wage, non-unionized, easily exploited labor. If the industrial North and the industrial South compete for global capital investment, then the industrial South is likely to prevail, because Northern advantages in the form of a skilled workforce and superior public services are unlikely to overcome the South’s advantages of low wages and low taxes and state and local tax subsidies. The result, sooner or later, will be the Southernization of the North and Midwest, as states in the historic middle-class core of the U.S. are forced by economic pressure to emulate the arrangements of Alabama and Mississippi and Texas.

The alternative to the Southernization of the U.S. is the Americanization of the South — a process that was not completed by Reconstruction and the New Deal and the Civil Rights era, which can be thought of as the Second Reconstruction. The non-Southern states, through their representatives in Congress and the executive branch, and with the help of enlightened Southerners, need to use the power of the federal government to put a stop to the Southern conservative race-to-the-bottom strategy once and for all.

Yikes.

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Filed under Culture, Liberalism (Left), The South

They used to make televisions there, no?

I’m afraid I don’t understand John Judis’s latest foray into economic nationalism:

Can’t Japanese, South Korean, and German firms (with the Chinese also readying an industry) supply cars to American consumers? First, of course, it’s a matter of several million jobs ranging from auto workers to suppliers to the myriad of small businesses that cater to these workers and businesses disappearing in the midst of global recession that is verging on a depression. Secondly–and little remarked–it’s the loss not merely of assembly line jobs, but also the ability to conceive, design and engineer large durable goods.

With them, it is not going to be possible to abandon manufacturing while retaining the ability to engineer and administer. The industry will disappear the way the American television industry disappeared. American workers and engineers will lose their ability to compete in a major durable goods industry–and that’s not a good thing.

Conservative jingos, at least, have a concrete argument for industrial favoritism. Preserving domestic heavy manufacturing is worth doing because it’s supposed to keep us strategically independent.

Other than protecting domestic jobs, however, I’m not sure what the liberal argument for industrial protectionism is. Apparently, losing heavy manufacturing capability is bad because . . . otherwise we won’t have any heavy manufacturing capability. Which sounds like a bit of a tautology, though I’m sure our lack of TV-producing infrastructure has had a devastating effect on American society.

The best argument that Judis can muster in favor of the bailout is the plight of American autoworkers, who certainly deserve our sympathy and support. So instead of propping up a moribund industry, let’s examine job retraining programs and beefed-up unemployment benefits. That, at least, would prevent auto industry execs from holding workers’ job prospects hostage every time bankruptcy looms.

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Filed under Economics, Liberalism (Left)

Department of Bad Analogies

The government is really good at running the military-industrial complex, so there’s no reason not to enter into a similar arrangement with the auto industry, right? Here’s Steven Coll:

Another fallacy of the current debate, often a theme of op-ed essays from the right, but an argument not limited to conservatives, is the notion that the American system is, and should be, fundamentally biased against industrial policy—that is, the use of the commanding heights of the federal government to pick winners and losers in the economy, whether these are whole industries or companies within industries. In fact, we already have a massive industrial policy, funded by the federal budget—it’s referred to as defense contracting.

Why does the United States have one of the most robust aircraft-manufacturing industries in the world? The answer is not that pure free markets have, through the workings of a natural law, granted us such a bounty. Yes, Boeing has been disciplined and strengthened by global-market competition, particularly with Airbus, but large-scale federal spending on defense contracts has crucially strengthened Boeing’s position as a locus of human capital, design experience, and innovation. In 2006, the federal government spent more than sixty billion dollars on aircraft manufacturers. Boeing received $20.8 billion, according to Government Executive magazine. (Lockheed-Martin received $27.3 billion, and Northrup-Grumman $16.7 billion.)

Now I’m no expert, but I believe this is the sort of thing economists refer to as the “fallacy of not paying attention” (Wikipedia entry forthcoming). A few days ago, Megan McArdle helpfully explained why implementing a massive clean energy “Manhattan Project” was pretty unrealistic. One critical distinction: there was no market for building a massive atomic bomb; renewable technology, on the other hand, is hugely profitable. Similarly, there’s no demand for infantry fighting vehicles, massive tanks, fighter jets, and aircraft carriers outside of the public sector. It’s not that the government is particularly good at industrial policy – it’s just that we don’t have much of a choice when it comes to the defense industry. National security demands we publicly finance at least a few products that would otherwise go unfunded.

So yes, under certain carefully prescribed circumstances, industrial policy is probably necessary. As far as the Big Three are concerned, however, there’s a clear market incentive for automotive manufacturing. So why is government a better steward than private investors? Coll’s argument seems to be that Boeing is flush with cash, ergo government-run industries are successful. While undoubtedly great news for Boeing’s shareholders, I’m not sure that this proves his point. The failure of several high-profile military projects in recent years – the much-vaunted Future Combat Systems, the F-22, the Zumwalt-class destroyer – strongly suggests that the defense industry’s products are frequently subpar (not to mention incredibly expensive). The government, of course, can afford a string of expensive failures, but I’m not sure the auto-industry has that luxury.

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Filed under Economics

Worthy Links

  • I know Obama supporters are supposed to be a bunch of unreconstructed Maoists, but Matthew Yglesias has a great post on why we shouldn’t bail out the auto industry.
  • EPL Talk imagines where every English club would end up if the Premiership moved to the United States. About half the teams get stuck in either Ohio or New York, and then there’s this gem: ” . . . only The City Of Angels, better known as Los Angeles, could host the decadence of Manchester City and their Middle East owners.”
  • Marc Ambinder flags Obama’s first weekly address. I wonder if YouTube will make this sort of thing relevant again.
  • Eliot Spitzer – yes, that Eliot Spitzerreemerges from whatever rock he crawled under to lecture the rest of us on the need for honesty and integrity.

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Slippery Slopes

I understand the distinction Megan McArdle is trying to draw here, and I think her larger point is basically sound – the financial services sector is more important to our economy than the auto industry. That said, I also think this argument exposes another unintended consequence of the bailout. Politically speaking, it’s extremely difficult to persuade voters that certain sectors of the economy are more deserving of federal largess than others. In fact, I imagine the economic impact of GM going under is a lot more tangible to most people than the prospect of Bear Sterns’ bankruptcy. The decision to bailout the financial sector has created something of a lose-lose situation: if Congress bows to mounting pressure and legislates more bailouts, the risk of a moral hazard increases exponentially. But if we hold the line and let GM die a natural death, many will undoubtedly assume that the financial services sector simply had better lobbyists. I’d probably choose cynicism over another bailout package, but neither option is particularly appealing.

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Filed under Economics, Politics