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Detroit, the Last Stand of Middle America

The question is not and never has been whether we should subsidize automakers for making the same fuel inefficient products, it is how to change what they make in the middle of an economic catastrophe.
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The question of bailing out Detroit devolves rather quickly to the question of whether to reward Detroit for being caught making the wrong product again like they did in the early seventies. Who would have thought that gas would be selling for $4 a gallon? Oh wait, its not. Its $2 a gallon. The situation is, admittedly, complicated by both the precipitous rise and then fall in gas prices.

Make no mistake, those auto industry jobs need to be saved. First and foremost this country cannot give up any more manufacturing capability. To do so, particularly in the vehicle industry, is a global strategic economic and military readiness blunder of epic proportions. Second, this country cannot lose anymore unionized industries. Only unions jobs, and not even the majority of those, have enjoyed wage increases on par with the massive increases in productivity and profit of the last three decades. To surrender to the call of the right wing to eliminate these last refuges of the middle class is also a global strategic economic blunder. The right will let the automakers fall for the single purpose of busting the last union strongholds. This is astonishingly short sighted. Our national power and influence is predicated on a powerful economy and its ability to consume products from both domestic and global sources and its ability to fund defense. Lower wages for American workers mean an inevitable reduction in global power.

Most seem to think that unions are the enemy of free markets. That view is a gross distortion. The rise of unions is a market force equal in validity to and a peer to the rise of capital investment. If we did not already have unions we would create them because the question of labor compensation cannot be left to the purchaser of it any more than a consumer can enforce a destructively low a price for a product from a businessman.

For the past three decades government has intervened with the function and prospects of unions on behalf of business touting a spurious economic ideology. It is fair and timely that now, having helped business destroy the economic might of America, government should intervene on behalf of unions and implement a more balanced Keynesian economic policy.

So there is no question that the jobs and the industry need to be saved, largely intact. Whether that is then a reward for short sighted management in Detroit or not is irrelevant. They got where they are through misapprehending economics in company with the dominant political party of the era, Republicans. In fact the crisis is of product, cars that are inefficient, and it became an issue because of rampant speculation enabled by regressive regulatory policy and law making. The true value of gasoline is about $2 a gallon, as in fact the true value of the DJIA is about 7000-8000. These are the prices supported by the real underlying markets. Markets that were fashioned by downward wage pressure and a worldwide race to find and exploit cheap labor to make consumer products for the U.S. marketplace, a market place that will cease to exist if the trend continues.

At $2 a gallon gasoline is not an issue and Detroit can catch its breath. With pre-emptive control of the commodities market, signaled by an Executive and Congress in accord, speculators will shy away from oil futures and oil will stay below $60 a barrel. OPEC may be required to make concessions to keep it there, but it is their global economy too. They have already seen what abreaction to price can do to price.

A sensible plan would be to de-emphasize retooling to smaller and more efficient cars and take a longer term approach. We can deal with issues, but not all issues at the same time. The economy is first, because without a strong economy the capital and prospects for producing a green economy will be stillborn. Poor countries cannot make massive investments in technology and we and everyone else are on enroute to becoming poor countries.

If something need be done in Detroit, in the short term, subsidize auto loans so that product and profit can be jump started. Back that up with a temporary national objective for fuel prices so that consumers can buy with confidence knowing their approximate near future costs for gas. To manage that manages the most volatile aspect of the global economic picture.

Long term, relieve the healthcare cost from vehicle production with universal healthcare. Universal healthcare will make U.S. automakers more competitive and simplify labor relations. And, it will decrease the threshold for resorting to protectionism. Protectionism is not a bad thing, it is just that we do not need the complication right now. Extend unemployment benefits so that any near term factory idleness does not result in complete forfeiture of skilled labor and middle management. Convert a percentage of production by every automaker to CNG power. Subsidize deployment of CNG fueling stations. In a few years phase in gas-electric hybrids and fuel cell power. The life cycle of a car is 5-10 years and product decisions have to reflect the reality of that investment cycle. Wonk on.

The question is not and never has been whether we should subsidize automakers for making the same fuel inefficient products, it is whether to and how to change what they make in the middle of a global economic catastrophe of Republican making. And as the Republicans seem to be taking this opportunity to do exactly the wrong thing for the economy, that being to break the last strongest unions, my perspective is that whatever they have to say is the opposite of what should be done. That's simple enough.

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