The elephant — and the donkey — in the room (Part 2)
The “great source of consistently outstanding reporting and commentary on the auto industry” I mentioned in my blog post yesterday is: Holman Jenkins of the Wall Street Journal (and author of the excellent antitrust column featured in my last blog).
Where others assume that all of Detroit’s problems can be blamed on bad managers, Jenkins points out the real sources of their decisions.
For example, he writes:
Why don’t the auto makers limit themselves to paying competitive wages and benefits in line with what workers could earn elsewhere? Because, in the 1930s, Congress passed the Wagner Act with the nearly explicit purpose of imposing a labor monopoly on Detroit to keep wages at higher-than-competitive levels.
Why doesn’t Detroit rationalize its musty brand lineups and dealer networks? Because, in the 1950s, legislatures across the country imposed franchising laws, including the federal “dealer day-in-court clause,” to make such rationalization prohibitively expensive.
Why don’t the auto giants do as Whirlpool and other manufacturers have done, and move their production to cheaper offshore locales? Because, in the 1970s, Congress enacted fuel economy rules to penalize homegrown auto makers if they don’t build the lion’s share of their cars in high-wage, UAW-staffed domestic factories.
No, Detroit’s troubles don’t arise because its executives are morons.
In this and other passages, Jenkins does something exceedingly rare that should be exceedingly common; when there is irrational, destructive behavior in the market, he doesn’t just look for business irrationality — he looks for government policies that mandate or encourage it. This is something that everyone who is concerned with truth and accuracy must do.
And this applies far more widely than the auto industry. For example, we routinely hear accounts of irresponsible lending and borrowing practices that helped bring about today’s financial disaster — with nary a mention of the government policies that rewarded such practices (with artificially low interest rates, guarantees on subprime mortgages, the “too big to fail” policy, etc., etc.). President Obama is a master of this sort of deception — as I discussed in “Misrepresenting ‘How We Arrived at This Moment.’” Here are some links to ARC articles setting the record straight on the financial crisis.
“Stop Blaming Capitalism for Government Failures”
And, to understand the real causes of the auto industry’s problems, here are some excellent pieces by Jenkins.
“Let Detroit Build Profitable Cars”
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