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Grab a Bucket For Detroit – Part I

Detroit has irritated me as much as anyone over the years.  I tried my best.  I really did.  I bought a Mercury Topaz, then two Saturns, then an Explorer, then a Villager… and by then I couldn’t take it any more and I bought a Nissan Altima.  I love it more than I have ever loved any car.  And shame on Detroit for allowing my level of satisfaction, after five(!) American cars… to drive me into the waiting arms of the Japanese.  Shame on them!

That said, there are a number of reasons why we should loan our auto companies taxpayer money to use for restructuring, retooling, and survival.  I’ll provide some background in this posting and then individual reasons in the next several on this topic.

Those Who Don’t Understand History Are Doomed To Repeat It.  Here’s Some Now.
There was a time in the American capitalist experiment before global trade became what it was today.  Robert Reich describes the era and the logic to it excellently in his book Supercapitalism.  For reason that was rational at the time, more or less of a balance had been achieved wherein competition was much more managed than our Cold War rhetoric would have had us believe.  In the name of mass production, companies had built and supported many of the government regulatory agencies to make barriers to entry steeper and to deliberately limit competition.  They also, grudgingly, supported the growth of unions.

Mass production required accurate forecasting, and accurate forecasting required stability.  Limited, oligopolistic competition, controlled with the assistance of the government, and a generally docile labor force managed by the unions made that possible.   In this era the middle class was created and it thrived.  The disparity between rich and poor was more narrow than before or since.  There was a lot of wealth to go around.  This came at a cost.  This broadly distributed wealth that enabled the middle class to become what it did came at the expense of investor profits, which rarely exceeded 3% to 5% and also at the expense of innovation which, by its nature, diminished stability rather than increased it.

During this era, which Reich calls “The Almost Golden Age” (acknowledging that minorities and women were, for the most part, not invited to the party), where wages for working people became truly meaningful, the 40 hour work week became the norm, and healthcare and pensions became standard corporate benefits, to the benefit of us all.

This pleasant enough stability came to an end with the massive expansion of the Vietnam War.  In order to keep our troops supplied, we developed the modern shipping container and the ports, ships, rail lines, and trucks to get goods and containers to Asia.  Rather than dead head back, the ships would stop off in Japan, pick up a load of generally poor quality merchandise, and sell it here.  This was the beginning of the global economy and global competition.  By the mid 1970’s competition was happening with or without the regulations that had made everybody so comfortable, so we began shedding them, starting actually in the Carter era.  By Ronald Reagan’s 1980’s, de-regulation was in full swing, corporate downsizing reached a fever pitch, innovation and quality skyrocketed, prices (adjusted for inflation and quality) plummeted, and corporate profits exploded.

In short, we as consumers and we as investors benefited enormously from global competition, but millions of us as workers (including white collar workers, by the way) got creamed as cheaper sources of labor were found elsewhere.  And we as citizens got creamed as control and the benefit of the government shifted away from our interests to those of corporations and lobbyists, as the disparity between rich and poor exploded, as our infrastructure spending crashed, etc.  Huge numbers of our industries vanished overseas… steel, textiles, manufacturing, programming, customer service…

During Reich’s “Almost Golden Age” our industrial giants, as part and parcel of the bargain that made the age what it was, took on substantial commitments to their workers.  In the shape of wages, working conditions and healthcare, corporations took on layers of current costs, and in the shape of pensions and retiree healthcare, they took on layers untold of future costs.  Those few companies and industries that have survived so far are now “burdened” with these legacy costs that stem from a balance of power between investors and workers that has long since been lost.

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