Over at The New Republic, John Judis offer an excoriation of the Congress and the administration for lack of action on bailing out the big 3 US auto firms. It is so mired in myopia, xenophobia and bad economics that this may get wordy.
On an opening, positive note, he acknowledges the fact that jobs are likely to shift to other more successful firms in the US:
Let’s assume that after the recession eventually lifts, Toyota, Nissan, Hyundai, Honda, BMW and other plants expand their manufacturing in the U.S. So there will be factory floor jobs and also jobs in showrooms and repair shops. But there won’t be as many--these firms will increasingly get their parts from abroad and merely assemble their products in the U.S., and wages will also decline relatively as the threat of the United Auto Workers recedes. But also the administration and the advanced engineering and design of these products will be housed abroad. Some of the brawn will be left; but the brains will be gone.
This ignores the fact that many of the major "foreign" firms are in fact desperate for design talent here in the US:
The Asian cars and trucks developed and designed within a 40-minute drive of Detroit read like a list of the most hated vehicles in Big Three boardrooms: Toyota Camry, Sienna minivan, and Avalon sedan; Nissan's (NSANY ) Titan, Altima, and Versa; and soon vehicles from Hyundai and Kia.
This mimics the computer industry in many ways. Much of the high-end design for computers and services happens here at places like Google and Apple. These firms also open research centers around the world -- wherever the talent is. This is good for us, good for those countries, good for the firms.
Our ability to play higher in the food chain depends on the quality of our talent, not on bailouts.
On the analogy of computer firms, Mr. Judis offers...
You can contrast the fate of autos and trucks with that of the American computer industry in the ‘80s. There was much concern then that the American semiconductor industry was losing its ability to manufacture computer chips. The Reagan administration entered the fray by putting a surcharge on Japanese imports and by subsidizing semiconductor research. The upshot was that the U.S. did lose out to Asia on low-cost semiconductors, but it retained its lead in the most advanced computer technology.
Actually, that "losing out" was of great benefit to US consumers. You may note that this period of losing-out coincided with the wide consumerization of high technology in this country. The consumer benefit of the newly-affordable technologies vastly outweighed the protection of a domestic manufacturing industry. Would that we could lose out more often.
What he calls a "loss", I would call a great win for poorer countries of the world, and poorer consumers here. Those countries' wages and employment improved greatly as they grew into the semiconductor industry. And cheaper, more advanced products here result in greater standards of living, most notably among those who shop on price.
To wit, from Mr. Judis:
Other countries seem to understand this. French President Nicholas Sarkozy announced a $33 billion bailout package yesterday. France is not in as bad shape as the United States, but Sarkozy is worried about the French auto industry and is promising to protect it in exchange for a commitment from it to produce cars in France rather than to outsource the production of them.
[H]aven’t Japanese and South Korean auto companies benefited from enormous government help themselves--and subsidies were the least of it. For decades, Japan--and currently South Korea--kept out American car companies. And the United States turned a blind eye, respecting the desires of these countries to have their own industries. Why should we begrudge our own companies a modicum of what we have tolerated from Japanese and South Korean companies?
For these countries to exclude American cars was undoubtedly a bad thing, not least for their consumers and our manufacturers. Unfortunately, Mr. Judis is offering a blatant two-wrongs-make-a-right argument: they did a destructive thing, so let's do the same.
The solution is not to "protect" American car companies, but to make America a great place to design, build and sell cars. Mr. Judis prescriptions would move in exactly the opposite direction.
You left out a mention of the large automobile design center community located in Southern California. Many foreign automakers design their cars intended for the American market there. What an idea, huh, to locate a major design center in America's top car-culture state? It's so obvious, one would think that even Detroit's Pig Three could have come up with the idea themselves.
Posted by: Micha Elyi | 14 December 2008 at 01:54 PM